The seemingly relentless slide in the oil price has savaged global financial markets and raised the spectre of widespread recession, but the derivatives market is showing traders are not necessarily buying into the "lower for longer" scenario.
Volatility, a gauge of options prices, has rocketed to its highest since the depths of the financial crisis in late 2008 as traders have scrambled to snap up protection against an even more aggressive sell-off.
This week has seen a flurry of buying of derivatives that give their holder the right to sell at $30 a barrel as far out as December, suggesting that traders and investors are growing increasingly gloomy about the prospects of price recovery.
But outstripping the increase in holdings of $30 so-called "put" options, is the rise in buy, or "call" options at $40 a barrel, which would suggest that traders believe that by December this year, oil at $40 will look like a bargain.
Data from the InterContinental Exchange (ICE) shows holdings of $40 call options for December this year leapt overnight to the equivalent of 27.92 million barrels of oil, making it the second-largest strike for options maturing that month.
The rout that has stripped 30 percent off the price of oil in the last 13 trading days alone has sent equity markets into a tailspin and gave rise to the now-famous "sell (mostly) everything" note by UK investment bank
RBS last week.
"With the current volatility, trying to catch a bottom in crude oil
on prompt futures has more than a $3 a barrel risk and a contango roll depreciation, but with Brent December 2016 falling below $35, the cost of buying a Brent December 16 $40.00 call has fallen down to $3.60 a barrel," Olivier Jakob, an analyst a Swiss-based consultant Petromatrix said.
"The Brent December 2017 $50.00 call is at $4.00 a barrel. Given the apparent signs of production stress at the current price levels we see the value in holding the longer-dated call options in crude oil at relatively low strike levels," he added.
Reflecting Petromatrix's point, open interest in December calls at $40 now outstrips that of March puts at $30 by a ratio of nearly three to one, based on the ICE data.
Over the last week, open interest in $30 puts in fact fallen by about 20 percent, while in those December $40 calls, it has grown sixfold.
There's also the matter of cost. Call options at $40 for contracts maturing between now and the end of the year cost little more than $1.50 each, compared with a cost of around $10.60 for put options at that same strike.
Still, traders say it's not entirely surprising to see demand for longer-dated calls that are for strikes well above the current market level when futures prices are sliding.
"It's been the trend of every melt down to buy upside calls before they get too expensive to get some delta when the market turns," one said.
(Reporting by Amanda Cooper; Editing by David Evans)