FMX | Connect (Reported 9/15/2011)

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

December Gold settled at $1,781.40 per troy ounce, a loss of $45.10 for the day.

Market Recap:

Gold traded lower on Thursday, as Greece and the ECB took steps to mollify investors on the short-term stability of the European Union.  Specifically, the ECB announced it would be able to ensure liquidity for endangered banks through the implementation of currency swaps and loans with central banks such as the Federal Reserve, the Bank of Japan, the Bank of England and the Swiss National Bank. The net result was a stronger euro and a weaker dollar, and while many of the underlying fundamental concerns will remain, it served as an effective deterrent for the time being. The U.S. economy is grappling with some issues of its own, including increasing jobless claims, a weaker manufacturing industry and varying degrees of political dysfunction. Again, expect the Federal Open Market Committee meeting next week to take on increased significance as it approaches.

Bullion traded lower with a weaker dollar, its appeal as a safe haven asset dissipating on the strong, coordinated message out of the world’s central banks this morning. Futures opened lower and traders expressed an immediate interest in downside protection, purchasing puts in October and across the term structure. On the day fences traded more than a dollar of premium toward the puts, and persistent call selling pushed volatility lower. Speculators disinvested from calls in October, November and December, with thousands of contracts changing hands across the 1800, 1900 and 2000 strikes. Gold has been showing signs of an atrophying rally and range-bound trading for nearly 2 weeks now. The market was waiting for this correction to happen. Now traders will have to decide how low prices will have to fall before the metal becomes a buy again.

 

Directional Commentary: 

Options: Yesterday we said options suggested gold was mired at the bottom of a range. Today, they are saying the selling will continue and the market will drift sideways to lower. Volatility was offered and puts were bid, both signs that the market is preparing for the possibility of continued selling and that a rapid recovery is unlikely. Conclusion: Bearish (Sideways to Lower)

Technical: Yesterday we said we were looking for a settlement below 1790 or above 1890 to see gold break out of its trading range. Gold settled at 1781 and traded as low as 1775 at the height of the selling. From here, gold is likely to continue to sell off, looking first towards support between 1705-1720 and then potentially all the way to the 100-day moving average at 1620. A move towards 1880 or higher would lead us to reevaluate the likelihood of a reversal but short-term prospects are not encouraging. The daily and weekly charts are both displaying vulnerability to the downside. Conclusion: Bearish

 

 

 

Active Options

V 1750 P

V 1800 C, 1900 C

Z 1800 C, 2000 C

 

ATM Volatility Curve:

As of 1:30 P.M.

 

Volatility Smile:

***From NYMEX Settlement

 

End of Day Straddles

GC
	Future	Bid	Offer
V11	1779.2	68	72
X11	1781.4	130	134
Z11	1781.4	168	172
F12	1783.4	203	207
G12	1783.4	230	234
H12	1785.2	255	259
J12	1785.2	281	285
K12	1787.2	302	306
M12	1787.2	322	326
N12	1789.3	343	347
Q12	1789.3	361	365

As of 1:30 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.