OIL OPTIONS: Crude Options Turn Bearish on Drop in Call Volatilities

The near-term Brent crude call-put spread has turned more bearish driven by a drop in call volatilities with the market focused on oversupply risks.

• The Brent second month 25 delta call-put spread has switch from a call skew of nearly +1% on Nov. 3 back to a put skew of around -0.6% today.
• The bearish move follows a drop in crude futures yesterday after a draw in US crude stocks as the market watches for signs of growing market surplus. Crude futures are seeing support from diesel market strength this morning after reports of refinery disruption overnight.
• The Brent Dec26 call-put has edged slightly more bearish to nearly -3.9% since reaching a put skew as narrow as -3.5% on Oct. 10.
• Second month at-the-money implied volatility has fallen to 26.7% with prices holding relatively rangebound in this last couple of weeks. The 30-day historic volatility remains at 26.6% but above the low of 20.6% seen in September.
• Aggregate daily option traded volumes have fallen to 189k in the last week, of which 104k was put volumes.
  • Brent JAN 26 up 0.8% at 64.01$/bbl
  • WTI DEC 25 up 0.9% at 60.11$/bbl

Source: Bloomberg Finance L.P.