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Crude Put Skew Strengthens Amid Large WTI Spread Trade Yesterday

OIL OPTIONS

The near term crude options are reflecting the bearish move in the futures market with an increasing put volatility premium over calls. Call volatility had been trading at a premium to the puts between 13 Oct and 3 Nov, but the skew has fallen as upside supply risks from Middle East have eased and with market focus on US and China demand uncertainty.

  • The WTI second month 25 delta call-put skew is showing a steady decline this week down to -3.9% today while the second month Brent skew has fallen to -2.85%.
  • The Brent Dec24 25 delta call-put skew is today around -7.1% and the WTI Dec24 call-put skew is at -6.9%.
  • Yesterday saw a spike in WTI aggregate traded options volumes up to the highest since 2020 at 436k driven by a giant 76.6/77$/bbl call spread trade likely as a hedge for a digital option with a fixed payout according to Bloomberg. Brent options volumes were also higher than the last week at 261k contracts. Brent crude futures aggregate volumes were up to 1.25m and WTI was up at 0.943m yesterday.
    • Brent JAN 24 down -1.1% at 80.71$/bbl
    • WTI DEC 23 down -1.2% at 76.44$/bbl
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