FMX | Connect (Reported 10/10/2011)
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
December Gold settled at $1,670.80 per troy ounce, a gain of $35.90 for the day.
Market Recap:
Gold rallied on Monday, uplifted by new commitment from the EU to recapitalize ailing and endangered banks. The euro surged, the dollar dropped sharply and dollar-denominated assets were almost universally swept higher.
Exchange volumes did not bear out much conviction for today’s rally with December estimated futures volume clocking in at a tepid 80,635 contracts. Options trading followed a similar pattern, and there was very little to speak of besides the selling and liquidation of front-month options. Volatility was lower across the term structure, and fences were largely unchanged. The biggest single trades of the day were the sales of the November and December 1600 puts. There was not a lot of interest in calls and call spreads overall, and some long speculators are beginning to throw in the towel. November has only 13 trade days until expiration, but there is some heavy open interest in December Calls that could really begin to weigh on this market if a rally doesn’t materialize.
Directional Commentary:
Options: Volatility was in about 1% on a tilt, and fences were mostly unchanged. Options activity continues to suggest that we will see slow rallies and/or range-bound behavior in the near-term. There is also a greater chance of a large sell-off than a rally, judging by the options skew. Conclusion: Neutral/Range-Bound
Technical: Gold continues to drift near the top of its trading range, but is struggling to find support for a more sustained rally. As we have stated previously, we are looking for a settlement above the top (1680) or below the bottom (1585) to initiate a break-down in either direction. While futures may continue to trend higher in the near-term we would be very reluctant to turn bullish at this juncture; declining volumes and open interest should be a cautionary sign for all potential buyers. Looking towards our broader targets, we are looking for gold to retest support at the 200-day moving average (1540) or resistance at 1750 before providing a better directional indicator. Again, we would be skeptical of the staying power of rallies on thin volumes, and think the intermediate trend remains firmly bearish. Conclusion: Thin Rallies Are Not to be Trusted/Bearish
Active Options
X 1600 P
Z 1600 P
G 2225 C
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| X11 | 1670 | 75 | 79 |
| Z11 | 1670 | 132 | 136 |
| F12 | 1675 | 183 | 187 |
| G12 | 1675 | 219 | 223 |
| H12 | 1675 | 248 | 252 |
| J12 | 1675 | 278 | 282 |
| K12 | 1675 | 303 | 307 |
| M12 | 1675 | 325 | 329 |
| N12 | 1680 | 349 | 353 |
| Q12 | 1680 | 369 | 373 |
| U12 | 1680 | 391 | 395 |
| V12 | 1680 | 409 | 413 |
| X12 | 1680 | 426 | 430 |
| Z12 | 1680 | 445 | 449 |
As of 1:30 P.M.
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End Of Day Straddles
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