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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
OIL OPTIONS
The crude implied volatility smile is relatively unchanged with little difference between 25 delta put and 25 delta calls in contracts this year. The biggest skews are for the low delta options with more significant skews covering extreme upside moves.
- ATM implied volatilities have settled recently just above 40% with crude futures gradually ticking upwards. Vols were just below 40% at the start of the year.
- The Brent crude options market suggests there remains significant upside price risk especially at the front of the curve. ATM Brent Aug22 options were 6.6% below Dec22 ATM vols at the close on Friday however Aug22 5 delta call options were marked higher than 5 delta calls in Dec22.
- WTI Jul22 options are due to expire against the futures close on Wednesday this week.
- The graph below shows the Brent option volatility skew for contracts expiring during 2022.
Source: Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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