FMX | Connect (Reported 5/27/2011)
The following is a report of Gold Option’s activity in the Over-The- Counter and Exchange traded venues. Information is compiled and summarized below.
Summary
June Gold settled at $1536.30 per troy ounce, a gain of $13.50 for the day. Calls were bid on a decisive rally in the underlying.
Options Commentary:
June Gold was called $8 higher and after opening at 1530 it traded sideways for a short period of time. We’ve mentioned 1535 as a key resistance area for futures and it certainly kept a lid on the market for an hour or so. During this time period option activity was choppy and volatility was stable, but offered. It appeared as if the long weekend was coming out from the opening bell. At 9:30 GLD opens, at this point in the day, one can often get a good feel for what the retail community wants to do. Today it wanted to buy. Futures started to rotate higher and July led the way with bids to the call side. As the day wore on calls were bid across the board while straddles were offered. Puts took a beating as the market took on very bullish expectations.
During the day we saw some options activity similar to our stalking horse 1600 Call buyer. The volumes were light but the tactics were consistent. The August 1600 Call and August 1620 Call (after the close) all were bought and remained bid in small increments as futures sold off. About 1500 of the August 1600 Call traded during that period. Overall, volatility was slightly higher on the day but volumes were unimpressive. The floor is closed for Memorial Day. Globex will be open for abbreviated hours, and Clearport will be open.
Directional Analysis:
The tone from options is bullish. Puts are offered and calls are bid. The implied volatility levels, however, suggest an orderly rally, as we did not reach break-even today. Our technical analysis suggests another leg higher may be coming.
Technically speaking we broke out of our trading range from 1489-1533 today. We are mildly bullish as long as the market settles above 1532 and would place stop-outs on a trade below 1520 or a settlement below 1532. We would add to the position if the market broke 1543 intraday. This area marked the start of a futures collapse at the beginning of the month with June gold trading down from a high of 1577 on May 2nd to a low of 1462.50 on May 5th. If futures can not overcome resistance at this area a return to the trading range is likely.
Active Options
N 1550 C
Q 1600 C
ATM Volatility Curve:
As of 4:00 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| N11 | 1535 | 50 | 54 |
| Q11 | 1535 | 76 | 80 |
| V11 | 1540 | 121 | 125 |
| Z11 | 1540 | 155 | 159 |
| G12 | 1540 | 190 | 194 |
| J12 | 1545 | 221 | 225 |
| M12 | 1545 | 247 | 251 |
As of 4:00 P.M.
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