image FMX | Connect (Reported 10/28/2011)

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 $1,747.20 per troy ounce, a loss of $.50 for the day.


Market Recap:

Gold was largely unchanged on Friday, as markets rode out the end of a volatile week in Europe.

Gold drifted lower in the overnight session. December Gold recorded more than a $100 gain on the week and we are starting to see increased profit-taking. Today’s trading saw a moderation in futures volume and a decrease in options volatility. Options were offered, both at-the-money and in wings. Call skew also subsided on the lack of movement. One of the more interesting structures traded was the 1700/1550 1x2 Put spread, both in February and April. It was initiated by a dealer. Dealer activity has started to pick up now that futures have broken out of the channel. Volatility was in more than 1% across the term structure.

 

 Directional Commentary: 

Options: Options are telling us the impulsive part of the move is over. While the shorts in futures may have been squeezed out in rally, there are still plenty of longs in options above the market looking to sell. Expect volatility to be capped until there is more material crisis-related news out of Europe. We would be sellers of hedged calls or call spreads in a rally. Conclusion: Neutral

Technical: December Gold was mildly lower on the day, settling a few dollars shy of 1750. Technically, very little has changed from yesterday. The next upside objective is 1789, the September 22nd high, after which futures would face increased resistance. Daily stochastics look overbought, so we would not be surprised to see a small set-off. While we remain slightly bullish for the near-term a settlement below 1711 could signal the end of the rally, and trigger a sell-off to the mid 1650s. Conclusion: Mildly Bullish

 

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Active Options

Z 1650 P, Z 1550 P

Z 1750 C

G 1700 P

J 1700P/1550P 1x2 P. spread

Z 2200 C

 

ATM Volatility Curve:

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As of 1:30 P.M.

 

Volatility Smile:

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***From NYMEX Settlement

 

End of Day Straddles

GC      
  Future Bid Offer
Z11 1745 89 93
F12 1750 144 148
G12 1750 181 185
H12 1750 211 215
J12 1750 243 247
K12 1755 269 273
M12 1755 293 297
N12 1755 319 323
Q12 1755 342 346
U12 1755 364 368
V12 1755 382 386
X12 1760 400 404
Z12 1760 419 423

As of 1:30 P.M. 

 

 

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