Traders and investors traded record-high numbers of options and futures contracts in October, seeking to profit from the oil market volatility and protect themselves against price slumps or spikes.
Oil options are contracts that give the holder the right, but not the obligation, to buy or sell oil at a set price if it moves beyond that price within a set timeframe.
As war risks increased following Iran’s missile attack on Israel in early October, markets were awaiting the Israeli response for most of last month and were frantically buying futures and options to hedge against growing uncertainties.
For most of October, oil prices were swinging between fears of a wider regional war and concerns about underwhelming global oil demand.
When Israel avoided targeting any energy infrastructure in its retaliatory response on Iran, oil prices slumped by 4% in one day, further highlighting the market’s precarious swings between bullish and bearish drivers.
As a result, this week both the Intercontinental Exchange (ICE) and CME Group reported record average daily volumes of contracts, including in energy contracts.
ICE reported on Tuesday a record average daily volume (ADV) in energy in October, surging by 21% from a year earlier, with open interest also up by 21%. Total oil ADV jumped by 22% y/y, including record options of 435,000 lots. Open interest hit a record 15.8 million lots on October 25, the exchange said.
Record contracts were also traded in Brent Crude and gasoil futures and options.
CME Group, for its part, recorded record October ADV for interest rate, energy, metals, and agricultural products.
Energy ADV increased by 16%, with an all-time record monthly energy options ADV of 528,000 contracts. Volumes traded of Henry Hub Natural Gas futures jumped by 22% to 562,000 contracts and WTI Crude Oil options ADV soared by 45% to 282,000 contracts, according to CME Group.
By Charles Kennedy for Oilprice.com
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