Stephanie Kelly and David Gaffen

(Reuters] – As crude oil futures reach new heights, bulls have flooded the U.S. market for crude oil options. They are betting that crude will continue its rally, as analysts and exchange data show.

Even before Russia invaded Ukraine, the global oil market was tight. This has sent U.S. West Texas Intermediate crude (WTI), and benchmark futures skyrocketing by over 15%, to close to 10-year and fourteen-year highs respectively.

Although sanctions against Russia were not intended to restrict Russia’s daily oil exports (of 4 to 5 million barrels per day), they have severely limited Russia’s ability to market its crude. Russia exports roughly 8% of global oil markets, behind only Saudi Arabia.

Traders are looking for opportunities to purchase options, which is a bet on the price direction of a commodity. Options volumes have surged over recent weeks, especially after February 24, when there was an invasion.

CME saw approximately 126,000 U.S. oil options contracts trade between January 19 and February 9. According to data from exchanges, this average has risen to 178,000 per day, which includes the two first days of March when there were more than 240,000 contracts.

Analysts believe that call options have seen the most activity – an investment in U.S. crude oil prices rising over coming weeks and months.

“You’ve got investors in the market now looking longer-term and putting in plays to try to see what’s happening, and it is stronger to the upside on higher prices,” said JB Mackenzie, managing director at Charles Schwab (NYSE:) Futures & Forex LLC. “The indicator is for higher prices.”

Mackenzie observed that options which expire each week also have increased in volume as a result of the rising price for crude.

Brent reached nearly $120 per barrel briefly on Thursday. WTI was at $116. A level that has not been seen since 2008 before it pulled back.

Analysts at JP Morgan said Thursday that Brent would average $110 per barrel during the second quarter.

Option traders are able to capitalize on volatility and make a profit, even if they don’t own crude oil futures contracts. Crude Oil Volatility Index has risen dramatically to 63 as a result of market swings on a daily basis. It is a gauge of past and anticipated market swings. This compares with an average of 40 in the 200-day period.

According to Robert Yawger of Mizuho’s executive director for energy futures, options expiring in April at a $120/barrel price, a wager that futures will beat that price, were the most commonly traded on Wednesday.

Although he stated that WTI call speculators were building positions, despite the fact that WTI options markets are preferred by producers who use put option contracts to protect from price falls, he said that WTI market participants have also been piling in on WTI calls.

Yawger explained that while commercials often use U.S. crude to hedge, the reality is the reverse.