Parity Report 7/27
PARITY REPORT – Crude Oil: 2012-07-26
WTI Crude Oil – August 89.39 +0.42 (Range 89.04 – 90.47)
ATM Vol – U12 30.9 -1.3\ V12 31.8 -0.7 \ X12 32.5 -0.7
Next Session’s Expected 1-StdDev Range for U12: +/-$1.74
Futures rallied in the hours before the session started and opened north of 90.00. Prompt vol opened down 150bps in response to the rally. But the 90 handle proved tetchy, and the underlying retreated towards the 89.00 level; vol rose 50bps on this movement. For the remainder of the session, futures chopped sideways, sucking the gains back out of vol. Looking at the vol-spread on the 10 delta calls (~98.00 line at close), we note that it reversed course and strengthened on the day. This indicates that bulls are warming up for another charge at the 90.00 level.