goldbullion FMX | Connect (Reported 7/27/2011)

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 $1625.10 per troy ounce, a loss of $1.70 for the day.


Market Recap:

Gold traded to new all time highs in overnight trading, spurred by rising concerns over the U.S. debt ceiling. The market remains preoccupied with the possibility of a credit downgrade or default. The Federal Reserve released the beige book for July, noting modest growth and soft unemployment. Equities, treasuries, and crude oil were down heavily by the end of the day, weakened by a strengthening dollar and the political climate. The dollar improved on increasing expectation of a credit downgrade and the higher interest rates this would incur.

Gold started the day very strong, climbing to a high of 1628.80 around 9:30 am. The December 1700 Call buyer purchased another 1,000 lots, continuing to accumulate patiently. The December 1675/1810 1x2 Call spread also traded in volume, but on the floor. Call buying diminished as futures sold off close to unchanged. Options activity was two-way with put skew regaining some of its vigor and market participants rebalancing some of their positions through fences. Volatility was slightly higher on the day. Gold settled largely unchanged, much like the state of the debt ceiling negotiations.


Directional Commentary: 

Options: Options activity for the day was mildly bearish. Market participants have shown an increased willingness to sell December upside calls and skew is beginning to move slightly towards the puts. While there wasn’t too much to get excited about either way, option buying did slow down. This doesn’t mean options think the rally is over but it does suggest the chances for an explosive move higher are less likely. Conclusion: Neutral

Technical: Yesterday we said the market was poised for new all-time highs and we were correct. Today’s daily candlestick formed a dark cloud cover, a bearish formation. Gold printed new highs but settled below the close and he relative strength index did not form new highs despite new highs in the underlying. While the long term trend is still bullish we may be looking at a small correction and profit-taking. A move through support in the 1578 area or the 20-day moving average would prompt us to reassess the chances of an extended down move. Our first target to the upside is 1635. Conclusion: Mildly Bearish

Editor’s Note: The candlestick did not form a dark cloud cover, one of our analysts misread the signal. Our technical conclusion is therefore neutral.

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Active Options

U 1600 P

V 1650 C, V 1710 C

Z 1700 C

Z 1675/1810 1x2 C. Spread

G 1500/1800 Fence

 

 

ATM Volatility Curve:

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As of 4:00 P.M.

 

Volatility Smile:

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***From NYMEX Settlement

 

End of Day Straddles

GC      
  Future Bid Offer
U11 1615 60 64
V11 1615 89 93
X11 1615 112 116
Z11 1615 130 134
F12 1620 150 154
G12 1620 166 170
H12 1620 180 184
J12 1620 196 200
K12 1620 210 214
M12 1620 224 228
N12 1625 238 242

As of 4:00 P.M. 

 

 

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