Oil Traders Return To Options To Hedge Against Price Hike

Oil traders are returning to options contracts to hedge against the risk of a price spike as markets brace for a possible Iranian attack on Israel, Alex Longley reported for Bloomberg News.

Bullish call options have been fetching a premium over bearish puts for each of the last three sessions, the longest run since Iran first attacked Israel in April.

Bullish call options have been fetching a premium over bearish puts for each of the last three sessions, the longest run since Iran first attacked Israel in April.

Trading volumes for calls on the global Brent benchmark are also elevated, with the 30-day average being the highest since May. Oil options markets have seen repeated episodes of elevated activity since the conflict between Israel and Hamas started in October.

Both then, and when Iran attacked Israel in April, activity in bullish calls surged as traders sought to hedge against the risk of disruption to oil supplies in a region producing about a third of the world’s supply.

However, the fact that options skews haven’t spiked as much as in October and April may indicate that traders are growing calmer about the danger to supplies compared to previous periods of elevated risk, said Harry Tchilinguirian, group head of research at Onyx Capital Group.

“The peak we reached on the skew is well below that of April but still sizable,” he said. “The market is still cautious, but maybe the level of angst around what comes next is lower the more time passes without Iranian action,” Devika Krishna Kumar also reported for Bloomberg News.