NEW YORK, Feb 9 (Reuters) - Oil traders have scrambled to scoop up options as additional protection against wild swings in prices, sending a key index to its highest level since the worst of the global economic crisis in 2008, data shows.
To hedge against volatility that has whipsawed oil prices this year, traders have positioned themselves more firmly on both sides of the market. They have jumped into various contracts, including March $25 puts and March $35 calls - which have hit record open interest in recent days.
Volatility, a gauge of options premiums and activity, for U.S. crude jumped to almost 69 percent on Tuesday, the highest since March 2009, according to Reuters Eikon data. In December 2008, it was above 100.
The flurry comes as oil benchmarks have tested new 12-1/2-year lows, falling nearly 8 percent on Tuesday, as one of the worst supply gluts in history looks likely to worsen and the possibility of coordinated action among OPEC and non-OPEC producers to rein in production has faded.
Nearly three weeks ago, Brent's volatility jumped to the highest since late 2008 as traders rushed to snap up additional protection against an even more aggressive sell-off.
The volatility in recent weeks has also in part been spurred by investors racing to close out massive short positions, according to analysts and traders.
Short positions in the U.S. futures and options have hovered around the highs it touched in the week to Jan. 12, according to data from the Commodity Futures Trading Commission.
"There's more uncertainty now, as we approach key turning points in the market after a long downtrend," said John Saucer, vice president of research and analysis at Houston-based Mobius Risk Group.
Oil prices have crashed about 75 percent since mid-2014 as a supply glut has increased and U.S. shale producers have resisted cutting output substantially, even in the face of plunging prices and mounting inventory.
"We're back below $30 and from a psychological perspective, there is a fear that we might retest lows hit earlier and that increases implied volatility," Saucer said.
Big fluctuations in foreign exchange - particularly the U.S. dollar, yuan and the euro - have added to the uncertainty, along with gyrations in equities and concerns about a global recession.
On Tuesday, the Chicago Board Options Exchange Oil volatility index - based off moves in the U.S. Oil exchange traded fund - jumped more than 6 percent.
(Reporting by Devika Krishna Kumar and Catherine Ngai; Editing by Josephine Mason and Lisa Shumaker)
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