FMX | Connect (Reported 4/18/2011)
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 $1492.90 per troy ounce, a gain of $6.90 for the day. Gold surged on a flood of options-buying, drawing tantalizingly close to $1,500 an ounce.
Commentary & Analysis:
The market came in lower yet May options were bid. At first we wrote this off to just too much premium being taken out last Friday but reassessed when June options caught a bid as well. Buyers came for calls in the 1500-1520 area for May and the 1500-1600 area in June. The market chopped around about $4 lower until the S&P announced it had changed its outlook on U.S. credit markets to negative. This is usually a precursor to a downgrade. Markets moved in tandem: gold higher, stocks lower, oil lower.
The complexion of the trading changed. Puts were sold naked June through December while call buying came in simultaneously for all these months. The prop desk of a European bank sold August 1400 puts at 14.5 against 1494 futures in August. Meanwhile over-the-counter banks were buying the 1350 P in December and financing it by selling the 1150 P/2000 C strangle. The tone was dynamic today with bulls selling puts unhedged and other bulls buying puts hedged. June was the strongest today on the call side but liquidity was there at every price if you needed it. May, on the other hand, was just bid.
Skew was performing for the calls and the change in volatility on higher moves is now consistent with that skew. Puts are beginning to be sold and it would seem we have ourselves a genuine old-fashioned gold call skew market for now. Future spreads were in again, in the rally.
Don’t miss our special Silver options expiration series STARTING HERE, with a special focus on the much-discussed May 40 call.
Active Options
K 1500, 1520 C
M 1375/1425 C. sprd
M 1450, 1500, 1520, 1550 C
Q 1400 P trd 2500x (floor)
Z 1350/1150 P. sprd VS. 2000 C 3-way
ATM Volatility Curve:
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| K11 | 1495 | 22 | 26 |
| M11 | 1495 | 52 | 56 |
| Q11 | 1495 | 97 | 101 |
| V11 | 1495 | 136 | 140 |
| Z11 | 1495 | 166 | 170 |
| G12 | 1500 | 198 | 202 |
| J12 | 1500 | 221 | 225 |
| M12 | 1500 | 254 | 258 |
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