Oil options have spiked to prices that imply crude could rise another 40 percent as recent big moves in the crude contract prompt heavy buying of protection against further price increases.
Implied volatility, the theoretical amount traders expect oil to move based on the price they pay for an option, has surpassed 40 percent on many key contracts, according to calculations made from Reuters data.
The December $150 a barrel call option hit $11 a barrel by midday on Friday, up nearly eightfold from $1.45 a barrel on May 1.
A $150 call option gives the buyer the right but not the obligation to buy the underlying futures contract at $150 a barrel. A trader who intended to exercise a $150 call after paying a $11 premium would not make a profit unless oil futures surpassed $161 by December.
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