Some 62 million barrels of October call options on West Texas Intermediate crude — that were set to expire worthless on Tuesday — are suddenly in the money after prices spiked on the open. As of Friday, there were 61,577 outstanding calls with strike prices ranging from $ 55 to $ 60 a barrel, higher than the $ 64.85 a barrel settlement.
With October WTI futures jumping as much as $ 8.49 at the open late Sunday after a drone attack took more than 5 million barrels a day of Saudi Arabian oil production offline, call prices spiked.
The October $ 60 calls, which settled at a penny Friday, jumped above $ 2. That means the 12,141 contracts went from worthless to $ 24 million. The $ 56 calls, which were only worth 19 cents Friday despite being a little more than a dollar away from the market, are now being talked at about $ 5.
Traders are paying up to protect against further rallies, driving implied volatility for 2nd month WTI to the highest since January, according to data compiled by Bloomberg. Calls became more desirable than puts for the first time since 2018 as futures surged.