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Crude Options Holding Put Skew Amid Competing Risks

OIL OPTIONS
Energy BulletsHomepagemarkets-real-timeBulletCommodities

Crude options are maintaining a skew in favour of the downside puts with a limited geopolitical risk premium and recent US macro data slightly more supportive of Fed cuts this year weighed against an expected extension to OPEC+ cuts into Q3.

  • The Brent crude second month 25 delta call-put skew is holding around -2.7% and the WTI second month skew is at -2.75%.
  • The Brent crude Dec24 call-put skew has narrowed slightly this month to -2.7% today but is still more bearish than levels of -1.4% seen in mid April. The WTI Dec24 skew is today trading around -3.35%.
  • Implied volatility has started drifting lower again with no clear direction to crude prices amid offsetting risks and front month trading in a $3.5/bbl range. Brent second month atm implied volatility is down to 21.9% and WTI to 24.1%.
  • Aggregate crude traded volumes have averaged near normal this week with Brent futures around 1.03m and options at 162k. WTI futures volumes have average 0.899m this week and options of 124k.
    • Brent JUL 24 up 0.2% at 83.42$/bbl
    • WTI JUN 24 up 0.2% at 79.37$/bbl

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Crude options are maintaining a skew in favour of the downside puts with a limited geopolitical risk premium and recent US macro data slightly more supportive of Fed cuts this year weighed against an expected extension to OPEC+ cuts into Q3.

  • The Brent crude second month 25 delta call-put skew is holding around -2.7% and the WTI second month skew is at -2.75%.
  • The Brent crude Dec24 call-put skew has narrowed slightly this month to -2.7% today but is still more bearish than levels of -1.4% seen in mid April. The WTI Dec24 skew is today trading around -3.35%.
  • Implied volatility has started drifting lower again with no clear direction to crude prices amid offsetting risks and front month trading in a $3.5/bbl range. Brent second month atm implied volatility is down to 21.9% and WTI to 24.1%.
  • Aggregate crude traded volumes have averaged near normal this week with Brent futures around 1.03m and options at 162k. WTI futures volumes have average 0.899m this week and options of 124k.
    • Brent JUL 24 up 0.2% at 83.42$/bbl
    • WTI JUN 24 up 0.2% at 79.37$/bbl

Keep reading...Show less