FMX | Connect (Reported 6/14/2011)
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
August Gold settled at $1524.40 per troy ounce, a gain of $8.80 for the day. Bullion bounced back from yesterday’s sell-off.
Market Recap:
Today was an uneventful day in the options ring. Futures came in a little higher and volatility proceeded to soften. There were moments when the market felt like it was going to make a push lower and during those moments July puts caught bids. There seemed to be no fear of violent movement anywhere else on the terms structure. The market worked its way higher to the 1520 area, the level we washed out from yesterday. After spending some time there it began rotating higher in fits and starts. There was very little interest in call buying on the highs. August, October and December at-the-money straddles were all sold as the market printed 1526. Once again, the market turned slightly towards the calls in terms of skew but it was from an absence of put buying and not an interest in call buying.
July options have attracted buy-side interest as we near expiration and August has replaced July as the most picked-on month by option sellers. Speculators are selling calls in rallies. Dealers are selling puts and straddles. The only fresh money in this market is buying December 2012 2000 Calls. These are chunky bids resting beneath the market from patient buyers, possibly a retail recommendation but we aren’t sure.
Directional Commentary:
Options: We are range-bound. The signs are myriad: Calls are sold in rallies, puts are sold in selloffs and straddles are sold everywhere in between. Today’s activity seems to imply we have found a home and is consistent with our technical analysis. Options Conclusion: Neutral
Technicals:We are range-bound with a downside target of 1507 (the 50 day moving average) and beneath that 1504 (Trend Reversal Point). There is a good chance of a return to the higher end of the range if the market settles above 1526. This could propel us to the 1535-1550 area but as it stands right now we don’t see much to get excited about. The market remains vulnerable on the downside and it will take more than today’s pullback to make us reassess our directional standing. Technical Conclusion: Neutral/Bearish
Active Options
N 1500 P
Q 1400 P
Z 12 2000 C
ATM Volatility Curve:
As of 4:00 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| N11 | 1525 | 28 | 32 |
| Q11 | 1525 | 56 | 60 |
| V11 | 1525 | 101 | 105 |
| Z11 | 1525 | 134 | 138 |
| G12 | 1530 | 168 | 172 |
| J12 | 1530 | 199 | 203 |
| M12 | 1530 | 225 | 229 |
As of 4:00 P.M.
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