Crude Oil Options

Calls and puts in one table

The main listed oil options

• WTI options on CME (NYMEX): American-style monthly options on the CL futures contract, plus weekly and short-dated options, and options on Micro WTI. Exercise results in a futures position.
• Brent options on ICE: American-style options on ICE Brent futures, 1,000 barrels each. Exercise gives a Brent futures position. According to ICE, trading stops three business days before the underlying futures contract's last trading day, a day earlier if that falls before Christmas, New Year or US Thanksgiving.
• Options on oil ETFs: listed equity options on funds such as USO, settled in fund shares. Their prices feed the OVX volatility index.

Because options expire before the underlying future, check both dates. Futures dates are in the oil futures expiry calendar; CME and ICE publish separate options calendars.

What determines an option's price

An option premium has two parts. Intrinsic value is how far the option is in the money: a $90 call is worth at least $5 when futures trade at $95. Time value is what buyers pay for the chance of a further move before expiry. Time value depends on:

• Time to expiry: more time, more value. Time value decays faster as expiry approaches.
• Implied volatility: the market's estimate of how much oil will move. Higher implied volatility means higher premiums for both calls and puts.
• Distance to strike: at-the-money options carry the most time value.
• Interest rates: a minor factor for short-dated oil options.

Implied volatility and the OVX

Cboe's Crude Oil ETF Volatility Index (OVX) applies the VIX methodology to options on the United States Oil Fund (USO) to estimate expected 30-day volatility in oil. It is often called the oil "fear gauge". OVX rises when traders rush to buy protection, typically during supply shocks or price crashes. It reached record highs during the April 2020 price collapse. Supply shocks such as the 2026 conflict around the Strait of Hormuz, when Brent rose from about $72 at the end of February to more than $112 by late March, are the kind of event that lifts implied volatility.

Oil options often show skew: in supply-risk periods, out-of-the-money calls become relatively expensive because traders fear sudden spikes. In demand slumps, puts become more expensive.

Hedging examples

An airline buys calls

An airline worried about rising fuel costs buys Brent call options with a $100 strike for a premium of $4 per barrel. If Brent rises to $120, the calls are worth at least $20, offsetting much of the higher fuel bill. If Brent falls to $80, the airline loses only the $4 premium and benefits from cheaper fuel. The hedge works like insurance. (Hypothetical numbers.)

A producer buys puts or a collar

A shale producer wants to protect revenue. It buys WTI puts at $75 to set a floor. To reduce the cost, it can sell calls at $105, creating a collar: protected below $75, but giving up gains above $105. Producers' hedging activity shows up in the "producer/merchant" category of the CFTC Commitments of Traders report.

Common strategies and their risks

• Vertical spreads (buy one strike, sell another) cap both cost and profit.
• Straddles and strangles (buy a call and a put) profit from a big move in either direction, but lose if oil stays quiet and implied volatility falls.
• Covered calls on oil ETFs generate premium but cap gains.
• Selling naked options collects premium but carries large tail risk. A sudden spike or crash, like those in March 2026 or April 2020, can turn a small premium into a large loss.

Risks specific to oil options

• Gap risk: geopolitical news can move oil 10% overnight, as on 8 April 2026, when Brent fell more than 13% after a ceasefire announcement.
• Volatility crush: after a feared event passes, implied volatility can fall sharply, hurting option buyers even if the price moved their way.
• Exercise and assignment: American-style options can be exercised early. A short option holder can be assigned a futures position with its own margin requirements.
• Negative prices: in April 2020 CME switched WTI options to a pricing model that can handle prices below zero, a reminder that extreme outcomes are possible.

For an overview of other instruments, see how to trade crude oil and oil ETFs.