Amanda Townsley, CME Group
At a Glance:
- Short-dated and micro WTI options are revolutionizing risk management, offering precise and cost-effective solutions for traders of all sizes.
- The confluence of improved analytics, trading platforms, and educational resources has propelled oil options trading to a 33% increase in volume in Q1 2025 over the previous year.
Once the exclusive domain of hedging specialists and quantitative experts, oil options are now attracting a broader range of participants, from energy giants to multi-strategy commodity funds and retail traders. What is the impetus behind this shift?
The utilization of oil options for risk mitigation within energy markets is not novel, but the recent upsurge in trading activity underscores a substantial change in how traders are addressing risk and potential gains. The first quarter of 2025 saw a 33% increase in CME Group WTI Crude Oil options trading volume over the previous year, while oil futures trading also grew 17%. Enhanced analytics, trading platforms and educational resources have rendered oil options more accessible and attractive to a wider spectrum of market participants.
Simplifying Options
A key driver of this trend has been the maturation of analytics tools and the increasing availability of option data, which have transitioned from specialized to ubiquitous. Armed with new information, new firms are empowered to explore oil options and existing traders are deepening their engagement.
Platforms like QuikStrike, for example, provide a wide range of tools, from visualizing the volatility surface to constructing strategies, all through a user-friendly web interface.
“The democratization of options analytics has been a game changer,” said Scott Bauer from Prosper Trading Academy. “Traders now have access to advanced tools that were once reserved for institutional players, allowing them to gain deeper insights into implied volatility, skew, and the various 'greeks'."
Compare Delta Curves for Multiple Expirations via QuikStrike
Online resources have also grown, offering educational tools to traders at all levels. Official courses, webinars, and interactive tools from companies like CME Group offer in-depth education on delta hedging, implied volatility, and the Greeks, with a specific focus on crude oil. Informal channels, such as Reddit's r/options and YouTube, have gained popularity, delivering a flow of commentary, tutorials, and trade analysis. While the rigor of these forums varies, they create a supportive community that lowers the barrier to entry for new participants.
Ease of Access: The Electronification of Oil Options
A pivotal element in the broadening of oil options access is the transition from traditional voice brokerage to electronic trading. In 2024, 88% of WTI options were being traded electronically on the Globex platform. This shift has helped to level the playing field, providing greater price transparency, market access and trading opportunities for all participants.
Advanced execution tools, such as the Request for Quote (RFQ) functionality on the CME Direct platform, have been key to this evolution. RFQ allows traders to combine option legs into a single strategy, replicating the flexibility and price discovery of brokered markets in an electronic format. Over 60% of WTI options trades now include multi-leg strategies such as spreads, butterflies and delta hedges.
"The trading of options strategies on-screen has become the preferred execution method for traders of all types—from institutional traders at hedge funds and banks to small-size retail traders with knowledge of options markets," said Jeff White, executive director of Energy products at CME Group.
Retail brokerage platforms, including Charles Schwab, Interactive Brokers and Tastytrade, have also broadened their support for energy derivatives. This has provided retail and semi-professional traders with real-time quotes, user-friendly execution interfaces and integrated risk tools.
An Option for Every Need
With the heightened volatility and event-driven risks in the oil markets, traders are increasingly in search of more adaptable risk management tools. Short-dated oil options, which have expiration periods of days rather than months, have become popular tools for trading around events, or capitalizing on the optionality of physical assets.
The most active of these short-dated oil options, WTI Weekly options, saw a 75% increase in 2024. This growth followed the introduction of new expirations for each trading day of the week, four weeks into the future. The appeal of weekly options is in their capacity to customize risk exposure to a specific day or event, a level of nuance not readily achievable with traditional monthly options.
"WTI Crude Oil Weekly options have been the fastest growing options product across CME commodities, as traders hedge weekend risk, market-moving events and unexpected volatility," said White.
In 2022, the introduction of Micro WTI Crude Oil options, at one-tenth the size of standard WTI options, provided a transformative opportunity for traders seeking reduced notional risk. These 100-barrel WTI weekly and monthly option contracts offer a more accessible entry point for smaller accounts – from retail traders to modest commodity funds – to engage in directional positioning, hedging and volatility strategies at a reduced cost.
A Growing Market
WTI oil options reached a recent daily record of 600,000 contracts in April 2025, indicating that the multi-year growth trend in oil options is showing no signs of abating. With volatility seemingly on the rise and global uncertainty reshaping energy risk, oil options are becoming increasingly relevant to a wider range of market participants. New product offerings, expanded electronic access and a wealth of educational tools and analytics have made options faster, smarter and more accessible.
Whether the need is to hedge storage tanks or to navigate the market around an OPEC meeting, there is an oil option available, supported by a community of traders that ensures the market remains accessible, transparent and liquid.
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