FMX | Connect (Reported 7/15/2011)

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 $1590.10 per troy ounce, a gain of $.80 for the day.

Market Recap:

Gold came in lower on overnight selling, and saw persistent profit-taking through much of the session. After a week of uncertainty surrounding debt problems out of Europe, U.S. debt rating reviews and innuendos of a possible QE3 from the Federal Reserve, Friday saw the market go unsatisfied on all fronts. Warnings of a possible downgrade from AAA status out of Moody’s and S&P seem to be pushing politician’s closer to doing the right thing, but the negotiations are going too poorly for the market to be happy with the progress or precedent. Friday also saw the European Banking Authority release the most recent round of stress tests in an effort to bolster regional confidence and a seemingly benign 82 of 90 banks passed. A closer reading proves less persuasive: the stress tests do not address  the concerns regarding Greece credit-swap exposure or how the previous stress tests were so far off the mark in regards to Irish banks. Today’s news was uninspiring, but more importantly, it was unsurprising. Markets were fairly calm after a rather disruptive week.

Volatility and skew came in offered but the trend didn’t last. Both firmed on the higher futures move and on the possibility of an encouraging stress test. Speculators focused on October and December, and mostly left August to the professionals. Roughly 4,500 December 1500 puts traded outright on Globex. More traded in put spread and ratio put spread form in other venues. Other speculators purchased straddles, buying the 1600 strike in October and December. Volatility was surprisingly resilient ahead of the weekend with the exception of August, which was slammed after the stress test results proved largely uneventful. Gold closed up on the day and traded higher in the afternoon session.

   

Directional Commentary: 

Options: Options performed strongly, almost unusually so. Volatility and skew were extremely firm ahead of the weekend. This only goes to show what a difference it makes to be trading near all-time highs. Two weeks ago we noted how poorly volatility performed on a $20 sell-off. Cleary, we are worlds apart. Conclusion: Bullish

Technical: Gold formed a hanging man on the daily chart today, telling us we should remain cautious despite our bullish assessment. August futures eked out a small gain after trading in the negative most of the day. We believe they will continue to trade higher and at least touch the 1600 strike before a pullback. Going into today, there were over 26,000 lots of interest at the August 1600 strike, suggesting that longs are holding on, despite the high volume of contracts continuing to trade there. We expect this open interest will serve to pull the market to the strike  (and potentially through the strike) as shorts hedge themselves. We see support near the once-highs of 1577 in a selloff and more support in the 1550 area. A move below 1548 and to the 50-day moving average could signal a change in market temperament. Conclusion: Bullish with a hint of Caution

 

Active Options

Q 1550 P

Q 1600 C

V 1600 Straddle

Z 1500 P

Z 1730 C

 

ATM Volatility Curve:

As of 4:00 P.M.

 

Volatility Smile:

***From NYMEX Settlement

 

End of Day Straddles

GC
	Future	Bid	Offer
Q11	1590	29	33
U11	1590	68	72
V11	1590	96	100
X11	1590	118	122
Z11	1590	136	140
F12	1595	157	161
G12	1595	174	178
H12	1595	189	193
J12	1595	205	209
K12	1595	219	223
M12	1595	232	236

As of 4:00 P.M. 

 

 

Premium Subscribers

(click here to register):

Volumes & Open Interest

End Of Day Straddles

Trade Blotter

Settlements

 

-----

About FMX: FMX Connect is an information, data, and analytics portal for Commodities. The portal provides an all-in-one package including essential market data, independent third party research, industry news, and commodity trading tools. FMX Connect provides efficient, effective, and thorough data that bridges all aspects of commodities onto one screen. The Result; A user friendly application for hedge fund traders, OTC brokers, individual investors, and industry participants
-----
Note: The information presented, while from sources generally believed to be reliable, is not guaranteed and may not be complete. FMX | Connect makes no representations or warranties regarding the correctness of any opinions or information. Past results are not necessarily indicative of future results. Nothing in this report should be construed as a representation to buy or sell shares, futures or options, which contain considerable risks. For internal client distribution only. Any reproduction, re-transmission, or distribution of this report without permission is prohibited. Media correspondents or reporters may not quote any one page or section in its entirety and must attribute all quotes, ideas or concepts herein. Copyright FMX | Connect, ©2009-2010. All rights reserved.