The Value at Risk of Selling Option on Crude Oil West Texas Intermediate

Abitur Asianto, Hermanto Siregar, Roy Sembel, Tubagus Nur Ahmad Maulana


The Value at Risk (VaR) of selling the option on crude oil WTI has not widely known, whereas this trade is the most significant transactions in the world. This study aimed to analyze the Value at Risk (VaR) of the far out of the money (FOTM) and the in the money (ITM) strike position of selling option on crude oil WTI investment. The monthly option premium return data ranging from April 1984 to May 2017 was analyzed by the ARCH-GARCH and VaR method to get the risk of FOTM and ITM strike position. Empirical results indicate that the risk of the FOTM strike was much lower than the ITM strike positions. It meant that selecting the FOTM strike position of the selling option on crude oil WTI investment could be considered by stakeholders because its risk was much lower than the ITM strike position.

JEL Classification: C32, G19, G32


value at risk; option; ARCH-GARCH

Full Text:



Abel, A. B., Bernanke, B. S., & Croushore, D. (2014). Macroeconomics. New Jersey: Pearson Education.

Asianto, A. (2014). Analisis Kinerja Empat Strategi Dasar Opsi Minyak Mentah West Texas Intermediate (Performance Analysis of Four Basic Strategy of Option on West Texas Intermediate Crude Oil). (Unpublsihed Thesis). Jakarta: Universitas Trisakti.

Augen, J. (2010). Day Trading Options: Profiting from Price Distortions in Very Brief Time Frames. New Jersey: FT Press.

Barone-Adesi, G., Legnazzi, C., & Sala, C. (2016). WTI Crude Oil Option-Implied VaR and CVaR: an Empirical Application (Swiss Finance Institute Research Paper No. 16-53).

Behmiri, N. B., & Manso, J. R. P. (2013). Crude Oil Price Forecasting Technique: a Comprehensive Review of a Literature. Alternative Investment Analyst Review, 2(3), 30–48.

Berkovich, E., & Shachmurove, Y. (2013). An Error of Collateral: Why Selling SPX Put Options May not be Profitable. Journal of Derivatives, 20(3), 31–42.

Bilir, H. (2016). Measurement on a Diversified Portfolio: Decomposition of Idiosyncratic Risk in a Pharmaceutical Industry. European Journal of Business and Management, 8(6), 35–40.

Bollerslev, T. (1986). Generalized Autoregressive Conditional Heteroskedasticity. Journal of Econometrics, 31, 307–327.

Capinski, M. J. (2009). Managing Value at Risk Using Put Options (AGH, Faculty of Appl. Math. Research Report 2010/05).

Clarke, J., & Clarke, D. (2012). A Beginner’s guide to Trading Options for Success: Options Made Simple. Melbourne: Wrightbooks.

Cordier, J., & Gross, M. (2009). The Complete Guide to Option Selling: How Selling Options can Lead to Stellar Returns in Bull and Bear Markets (2nd editio). New York: McGraw Hill.

He, K., Lai, K. K., & Xiang, G. (2012). Portfolio Value at Risk Estimate for Crude Oil Markets: a Multivariate Wavelet Denoising Approach. Energies, 5, 1018–1043.

He, P. (2012). Option Portfolio Value at Risk Using Monte Carlo Simulation Under a Risk Neutral Stochastic Implied Volatility Model. Global Journal of Business Research, 6(5), 65–72.

Jorion, P. (2011). Financial Risk Manager Handbook Plus Test Bank (6th editio). New Jersey: John Wiley & Sons.

Li, B. (2013). Two Essays on Crude Oil Futures and Option Markets. Houston: University of Houston.

Li, Y. X., Lian, J. G., & Zhang, H. K. (2016). Forecast and Backtesting of VAR Models in Crude Oil Market. Research and Review: Journal of Statistics and Mathematical Sciences, 2(1), 131–140.

Liu, S. I. (2012). Estimations on VaR for Options: Extension of Delta-Gamma Method. IJRRAS, 14(1), 40–50.

Marimoutou, V., Raggad, B., & Trabelsi, A. (2009). Extreme Value Theory and Value at Risk : Application to Oil Market. Energy Economics, 31(4), 519–530.

Mugwagwa, T., Ramiah, V., Naughton, T., & Moosa, I. (2011). The Efficiency of The Buy-Write Strategy: Evidence from Australia. International Finance Markets, Institutions, and Money, 22, 305–328.

Oetomo, B., Achsani, N. A., & Sartono, B. (2016). Forecasting Market Risk in ASEAN-5 Indices using Normal and Cornish-Fisher Value at Risk. Research Journal of Finance and Accounting, 7(18), 28–38.

Raj, K. B., & Raj, K. L. S. (2017). A Comparative Analysis Among Indian Commercial Banks (Public & Private) and a Foreign Bank Using Var (Value-At-Risk) Model. European Journal of Business and Management, 9(31), 1–10.

Saliba, A. J., Corona, J. C., & Johnson, K. E. (2008). Option Strategies for Directionless Markets: Trading with Butterflies Iron Butterflies and Condors. New York: Bloomberg Press.

Su, J. B. (2010). Value-at-Risk Forecasts in U.S. Crude Oil Markets. China University of Science and Technology, 42, 161–175.

Summa, J. F., & Lubow, J. W. (2002). Option on Future: New Trading Strategies. New York: John Wiley & Sons.

Thomsett, M. C. (2008). Winning with Options: The Smart Way to Manage Portfolio Risk and Maximize Profit. New York: Amacom.

Welborn, J. W. (2013). Three Essays on Naked Short Selling and Fails to Deliver. (Unpublished Dissertation). Virginia: George Mason University.

Zerenner, E., & Chupka, M. (2008). Naked Puts: Power Strategies for Consistent Profits. Maryland: Marketplace Books.

DOI: Abstract - 0 PDF - 0 PDF - 0


  • There are currently no refbacks.

Copyright (c) 2019 ETIKONOMI


/public/site/images/rianto-arif/logogaruda-kecil_94 Dimensions | The Next Evolution in Linked Scholarly Information  Academic Keyoa-library CrossRefMoraRefBASE-Search OAJI Open Archives Initiative

Hasil gambar untuk

View My Stats


E-ISSN: 2461-0771 P-ISSN: 1412-8969 Free counters!


This work is licensed under CC BY-SA

© All rights reserved 2015.