Afternoon Gold Fix – March 2, 2011
FMX | Connect (Reported 3/02/2011)
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 $1437.70 per troy ounce, a gain of $6.50 for the day. Volatility and call skew continued to perform as the market reached all-time highs.
Active Options
J 1450 C trds 4000x (globex, comex)
J 1500 C trds 3000x (globex, comex)
J 1400 P
Various Upside Calls 1600-1800 (multiple months)
Analysis:
In some respects today was a repeat of yesterday. Most of the significant activity was in April as dealers sough to square up their positions. There was 2-way business in the 1450 C. Banks bought the 1500 C and various fences traded with banks buying the calls there as well. Other than that, the rest of the curve was dominated by retail call buying such as recommendations in the June 1500 C and 1800 C. Not much else traded but volatility was bid consistently.
Commentary:
Options activity was disappointing today. There was plenty of it but it was focused in April. Not much fresh interest came into the markets despite gold sitting on all-time highs. We might be a little toppy here. It is interesting to notice that at the moment the stock market opened and GLD began trading comex had a $2 pop in the futures, probably from a retail order bottleneck arbitraged onto the floor. These signs give us pause before remaining too bullish. Skew shifted significantly for the calls again today but that is not necessarily bullish. That just means volatility will expand if we go higher and contract if we go lower. As we sit here and look at the market, once again the futures sold off hard after the comex close only to rebound on buying (April gold dropped as low as 1431 post-close but is now back to 1435). We can’t help but think this market is being spoofed lower so a long can add to his position at more desirable levels.
ATM Volatility Curve:
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| J11 | 1440 | 44 | 48 |
| K11 | 1440 | 68 | 72 |
| M11 | 1440 | 89 | 93 |
| Q11 | 1440 | 128 | 132 |
| V11 | 1440 | 162 | 166 |
| Z11 | 1445 | 193 | 197 |
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