As crude oil futures prices tumbled from their all-time highs between July and October, open interest dropped sharply as well. But investors did not completely abandon the market, but shifted their bets over to options.
Between July 8 and October 7, open interest in NYMEX light, sweet crude futures fell from 1,316,278 to 1,087,569 contracts, according to Commodities Futures Trading Commission weekly position data. The decline was steepest in the past month, falling from 1,231,450 contracts on September 9.
During the same July-October period, though, combined futures and options open interest rose from 2,920,180 to 2,980,374 contracts, and from 2.961,294 contracts on September 9.
The first week of October showed a big jump into options, with futures open interest sinking 4,842 contracts, while combined open interest surged 145,184 contracts. Open interest figures from the CFTC do not exactly line up with NYMEX numbers, due to adjustments made by the CFTC. For example, the CFTC delta-adjusts options, creating a synthetic futures position.
Still, NYMEX data back up the CFTC. Between September 30 and Oct 7, options open interest rose by 156,818 contracts, with 91,270 calls and 65,548 puts bought during the week.
The ability to put on options positions that eat up far less precious capital than do futures certainly has supported the growing popularity of options, as has the immense volatility in the underlying futures market.
With crude continuing to bounce around like a crazy ball, there's every reason options open interest should remain strong, no matter where the futures price goes.
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