Afternoon Gold Fix – March 1, 2011
FMX | Connect (Reported 3/01/2011)
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
April Gold settled at $1431.20 per troy ounce, a gain of $21.30 for the day. Volatility rallied on the back of call buying and puts were offered.
Active Options
J 1350P /1505 C Fence
J 1450 C
M 1500 C
M 1600 C
Analysis:
During London time and on the comex open risk reversals traded in April and June with dealers buying call and selling put. Subsequently, June 1600 Cs were purchased live. Funds bought while dealers and market makers sold. Volatility proceeded to rally from there in step with the market’s movement. Puts were almost not quoted at all, except to be sold in fence form. On the day skew was up, call tails were raised and volatility was higher.
Commentary:
It’s about time that this market started acting like a commodity and not a proxy for some ETF product traded by mutual fund managers. Call skew rallied to levels not seen in a long time as first dealers rolled their longs higher to let them hedge their gamma and then funds added to existing positions. It seems that the constant flow of GLD call selling that used to spill over onto comex has subsided. Perhaps we are entering a parabolic phase now that we are at all-time highs. We alerted readers to get long 2 days ago and remain behind our call of a top side of 1475-1550 in the next 8 weeks.
Gold Momentum Indicator Triggered. Breakout Imminent above $1412.00
TrendVol Alert: Gold to Reach 1550 within 8 weeks
ATM Volatility Curve:
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| J11 | 1430 | 44 | 48 |
| K11 | 1435 | 68 | 72 |
| M11 | 1435 | 88 | 92 |
| Q11 | 1435 | 125 | 129 |
| V11 | 1435 | 161 | 165 |
| Z11 | 1435 | 190 | 194 |
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