Options on WTI continue to trade in heavy volume. 254,928 contracts traded on Friday. We have seen some days this month trade over 300,000 contracts. Average daily volume for 2015 was around 156,000. Bottom line is that the option market is very busy. The most active option on Friday was the March 25p with almost 15,000 trading. Open interest is up to 29,023 on this strike. A new $10 put traded in September, but only 200x. $10 puts have now traded in April, June, August and September, although the volume is extremely light in these. Implied volatility dropped sharply to 58.5 from 63.0. basis March. Higher prices, of course, correlate with lower implied vols.
We are beginning to see extreme or potentially contrarian statements in the news, like last week’s IEA comment about how we might “drown in over-supply” of crude, or, the story that Russia is looking at hedging barrels (after a +$70 drop in price!). Option markets sometimes give us a good indication of how participants feel about extreme price outcomes. The two largest open interest puts are the above mentioned March 25p (29,023) and the Dec 30p with (38,327). (The largest open interest WTI option is the Dec 120c with 49,467, settling at a (plug?) nickel). But, so far, no $5 or $0 puts have traded, and $10’s are opening up slowly with little volume…
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