WTI Crude Oil Options Market Prior to and During the COVID-19 Pandemic

Authors

  • Bartosz Łamasz Faculty of Management, AGH University of Science and Technology, Kraków, Poland.
  • Marek Michalski Faculty of Management, AGH University of Science and Technology, Kraków, Poland.
  • Radosław Puka Faculty of Management, AGH University of Science and Technology, Kraków, Poland.

DOI:

https://doi.org/10.32479/ijeep.13865

Keywords:

Price Risk, Crude Oil, Options Market, Implied Volatility, COVID-19

Abstract

The COVID-19 pandemic has caused turbulence in many areas of the global economy. It also contributed to an increase in volatility on the energy commodities market. This spilled over into the derivatives market, particularly the crude oil futures market. The aim of the article is to compare the costs and effectiveness of using options on WTI oil from before and after the pandemic. The analyzes took into account the value of option premiums and final results obtained by buyers of call options from March 1, 2018 to April 14, 2022. The results showed that buyers of call options during the pandemic, despite paying much higher option premiums, experienced significantly higher payouts and rates of return. They were the highest for options with the longest expiry periods of 21-30 days. Research also showed that during the pandemic, options with strike prices set at a level higher than the price of oil on the contract date had particularly high rates of return, while the highest payout values were achieved by buyers of call options with low strike prices.

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Published

2023-03-24

How to Cite

Łamasz, B., Michalski, M., & Puka, R. (2023). WTI Crude Oil Options Market Prior to and During the COVID-19 Pandemic. International Journal of Energy Economics and Policy, 13(2), 117–128. https://doi.org/10.32479/ijeep.13865

Issue

Vol. 13 No. 2 (2023)

Section

Articles

License

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