Crude Option Bearish Skew Increases as Volatility Drifts Lower

Brent second month call-put has extended the recent decline with the put premium increasing as concern for near term demand weighed on the market last week. The crude futures rally and demand optimism this morning has not been reflected in any changes the near term options volatilities yet.

• The second month Brent call-put skew is down to around -4.5% from -3% at the start of the month and -1.8% on 16 Dec. The WTI second month call-put spread has declined to approximately -4.8%.
• The Brent Dec23 skew is hovering around -5% with optimism for a demand recovery later this year and potential further Russian supply disruption providing support. The spread has risen from a low of -5.9% at the start of the month. The WTI Dec23 skew is around -6.1%
• Crude ATM implied volatility has pulled back from a peak mid last week with the Brent volatility back from nearly 46% down to 44.9%. WTI ATM volatility is slightly higher than Brent at 45.9%.
  • Brent MAR 23 up 3.3% at 81.2$/bbl
  • WTI FEB 23 up 3.6% at 76.43$/bbl

Source: Bloomberg