Hi, I don't deal in crude at all, although I do trade NYMEX heating oil. But I'm baffled by this report: http://www.bloomberg.com/apps/news?pid=20601109&sid=awiq7K1Ch3BU "Options granting the right to sell, or put, oil in December below current prices have a so-called implied volatility of 54.3 percent, compared with 43.3 percent for the equivalent options to buy, or call, data from the New York Mercantile Exchange show." I haven't looked at the numbers... but what market mechanics make this possible? What's keeping people from arb'ing this?
Wait... when it says "equivalent" calls... is it possible it's not talking about the same strike? It's just looking at strikes that are, perhaps, equally OTM from current future price?
Right. If futures are at 70, then "equivalent calls and puts" would be, say, the 80 calls and the 60 puts. When option traders talk about "the puts," they generally mean the OTM puts. When they say "the calls," the mean the OTM calls. So this article is really about the skew - the downside put skew being steep compared to the upside call skew.