UWT - Oil: Implied Volatility Soars But Path Ahead Is Unclear
By Erik Norland
The 44% decline in crude oil prices in Q4 2018 was dramatic but pales in comparison to the 79% plunge between July and December 2008 or the 76% tumble from late 2014 to early 2016. Remarkably, implied volatility on 30-day West Texas Intermediate ((WTI)) crude oil options spiked to levels in line with those seen during the 2014-16 bear market, although they fell short of the record highs in 2008 (Figure 1). Longer-dated options came close to both the 2015-16 and 2008-09 highs. Moreover, even though oil prices have rebounded substantially from