Crude Options Volatility Skews Turn More Bearish

Crude option skews have turned more bearish this week to cover downside market risks driven by global demand concerns and non OPEC supply growth. Futures prices yesterday broke through recent range highs amid heightened geopolitical risks and China’s economic support although have edge lower again today.

• Brent crude second month 25 delta call-put skew is today wider at -2.95% from as narrow as around -1.35% last week. The WTI second month 25 delta call-put skew is -3.45% from about -2.45% on Jan 16.
• The Dec24 crude option call-put skews have also turned more bearish after seeing the spread narrow to a high on Jan 22. The Brent skew if down from nearly -5% last week to -5.7% today while the WTI Dec24 skew is down from -5.6% to -6.35%.
• Crude second month ATM implied volatility has fallen further over the last ten days with futures prices holding in a range this year until a break to the upside yesterday. Brent implied vol is currently at 28.9% and WTI at 31.3%.
• The Brent aggregate option traded volume was at 251k yesterday from an average of around 170k earlier this week. WTI options volumes were 139k yesterday compared to 98k. Brent futures traded volumes were also slightly higher yesterday at 1.1m but WTI volumes remained below normal at 0.67m yesterday.
  • Brent MAR 24 down -0.6% at 81.93$/bbl
  • WTI MAR 24 down -0.9% at 76.66$/bbl