Options Traders Bet February Oil Will Fall Below $25

[Meadie]

Nov. 26 (Bloomberg) -- Oil traders placed bets that crude oil for February delivery will collapse to below $25 a barrel as economies around the world slide more deeply into recession, cutting energy demand.

February $25 puts, the third-most actively traded option, rose 8 cents to 10 cents a barrel, or $100 a contract, at 12:15 p.m. on the New York Mercantile Exchange. A total of 184 lots traded, up from none yesterday.

“It’s a lottery ticket,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “It’s somebody making a bet that crude oil is going to crash in the next six weeks.”

Crude oil futures have dropped 55 percent in the past three months, dropping below $50 a barrel last week, as a credit squeeze pushed economies into recession and reduced demand for petroleum products. Orders for U.S. durable goods fell twice as much as forecast in October, the Commerce Department said today.

Crude oil for January delivery gained $2.18, or 4.3 percent, to $52.95 a barrel at 12:49 p.m. on the exchange. Futures gained after China, the world’s second-biggest energy consumer, reduced interest rates the most in 11 years to raise economic growth.

January $56 calls, the most actively traded option, gained 37 cents to $2.55 a barrel, or $2,550 a contract. A total of 369 lots traded, up from 106 yesterday. January $70 calls, the second-most actively traded, fell 3 cents to 35 cents, or $350 a contract, with 246 lots traded.

“With stock markets around the world stabilizing, the idea that crude oil could end its bear market is very much possible,” Cordier said.

One options contract equals 1,000 barrels of oil.

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