Oil price's plunge sends options trading into a frenzy

Oil's plunge through $50 a barrel set the options market on fire. A record number of options contracts - equivalent to more than 800 million barrels of crude oil - changed hands on Thursday, according to exchange data compiled by Bloomberg.

The tally includes trading for Brent and West Texas Intermediate crude in London and New York and shows a surge in bets that the former will reach $70 a barrel by September. The trading, which allows investors to protect themselves or profit from price swings, takes place as the market emerges from its least volatile period in years.

Since Nov 30, when the Organization of Petroleum Exporting Countries agreed to curb output for the first six months of this year, prices have hovered above $50 a barrel. That period of calm ended as WTI fell to its lowest level since the Opec deal, amid rising US stockpiles that threaten to prolong the global glut. “Everyone is a little afraid in the short run because who knows what the market beast might do,“ Michael Poulsen, oil risk manager at AS Global Risk Management, said by phone. “In the long run, either Opec will cut or demand will pick up a bit of this extra supply . It's a bit of a tango around the middle-term.“