(Bloomberg) -- Options show investors are betting that oil prices will rise further as escalating hostilities between Israel and Iran risks damaging energy infrastructure in the Middle East.
Call options, which profit from when prices rise, were at a premium to puts at Wednesday’s close for the first time since the middle of August. The volume of bullish Brent calls hit a record — propelled higher by activity in contracts at $100 and above.
It’s been rare for calls to fetch a premium over puts in the oil market — though such a move has happened on a handful of occasions since war broke out between Israel and Hamas last year.
The action in the options market is corresponding with a gain in futures contracts. They are rising rising on the prospect of a full-blown war in the Middle East that could disrupt oil production and transport. Brent is up about 4% since Iran fired more than 100 ballistic missiles at Israel earlier this week. A gauge of implied volatility for the global benchmark has jumped to the highest level in almost a year.
More than 372,000 call options changed hands on Wednesday. That compares with an average of about 129,000 per day in September. Higher-than-average volumes of WTI calls were also traded.
Most of those volumes were contracts that would benefit a buyer if prices rise above $100 a barrel. More than 50 million barrels of $100 calls traded.
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