FMX | Connect (Reported 9/26/2011)
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 $1,592.50 per troy ounce, a loss of $45.00 for the day.
Market Recap:
Gold prices skydived on Sunday in response to fresh margin hikes out of the CME Group. Though the changes don’t go into effect until tomorrow the reaction was immediate, and bullion tumbled just below $1,533 an ounce in the frenzy. Nonetheless, prices bounced back briskly, trading back into the 1630s approaching the Globex close. Gold found support not only above the 200-day moving average near 1530 but also from reports that the ECB seems to be preparing new measures to strengthen the EFSF and address fears of a Greek default.
Volatility opened the day sharply higher, with October options outperforming the other months in early trading. October options expiration is tomorrow, and traders continued to shore up positions, with particular emphasis on the 1550, 1600 and 1650 strikes. Volatility began to come in as futures stabilized in the low 1600s but finished higher on the day. Call skew was also offered. Check back with us tomorrow morning for our pin risk analysis on the expiration.
Directional Commentary:
Options: On Friday we said options behavior was bearish and gold traded drastically lower in the weekend session. Volatility was firmly bid on the move, and is likely to contract aggressively as the market stabilizes. Tomorrow is October options expiration and this is likely to have a large effect on futures behavior. Specifically, we think a pin of the 1600 strike is viable. Conclusion: Neutral
Technical: December gold traded to 1535 in the wake of a margin-induced selloff, before rebounding strongly from near the 200-day moving average. Gold is now trading back near the 100-day moving average at 1635, and its near-term movement is likely to be strongly influenced by October open interest. While the strong bounce from the low may be a good indication that gold is approaching a bottom, we would still be hesitant to buy at this level. Gold seems likely to trade sideways or consolidate further before forming the base for another rally. Additionally, while the RSI and slow stochastics are both low it appears they still have more room to run before a reversal. Conclusion: Sideways/Bearish
Active Options
V 1600 C, 1650 C, V 1700 C
V 1550 P, V 1600 P
X 1800 C
X 1600 P
J 12 1900/2400 Ratio Call Spread
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| V11 | 1595 | 32 | 36 |
| X11 | 1595 | 132 | 136 |
| Z11 | 1595 | 174 | 178 |
| F12 | 1595 | 210 | 214 |
| G12 | 1595 | 241 | 245 |
| H12 | 1600 | 265 | 269 |
| J12 | 1600 | 288 | 292 |
| K12 | 1600 | 309 | 313 |
| M12 | 1600 | 328 | 332 |
| N12 | 1600 | 350 | 354 |
| Q12 | 1600 | 369 | 373 |
As of 1:30 P.M.
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