FMX | Connect (Reported 10/03/2011)
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 $1,657.70 per troy ounce, a gain of $35.40 for the day.
Market Recap:
Greek debt disquiet ratcheted up a notch on news that the deficit exceeded the 6.5% of GDP benchmark the country was aiming for. While the Greek Parliament passed new austerity in response (to the tune of 6.6 billion euros), an increasing number of investors are seeing default as inevitable. Conflicts over how to proceed are churning markets lower and volatility higher. Current reports lead us to believe that a beefed-up EFSF is likely, but the torrent of uncertainties is still overwhelming. On the day investors sold equities and industrial commodities, diverting capital into the dollar, treasury notes and gold.
Gold rallied just over $35 on the day, and compared to the scope of recent sell-offs, this wasn’t a lot. Volatility remained firm, held aloof by tumult in Europe and concerns of another violent move. Puts were bid in November and December, and while calls continued to trend slightly lower, without a lot of speculative activity to drive it, many market participants are content to watch their positions unfold. Puts below the 1600 strike were the primary interest of the day, all though the market is becoming increasingly optimistic that futures may have established a bottom.
Directional Commentary:
Options: Puts and volatility remained firm over the weekend. The most notable aspect of today’s trade was that volatility was higher on a relative small rally, which could be interpreted as somewhat bullish. Skew didn’t provide confirmation however, with front month calls mostly unchanged, and back months mildly lower. Options behavior is somewhat bearish, but today didn’t give a strong indication overall. Conclusion: Neutral/Bearish
Technical: Gold rallied to settle at 1657.70, closing above the 100-day moving average and signaling possible support in this area. Despite the gains, the trend in gold is still sideways to lower and we would be looking for a settlement near 1750 to trigger a possible reversal. If the sell-off resumes gold is likely to retest the 200-day moving average at 1533. The RSI and slow stochastics have reversed from recent lows, suggesting we may have reached a recent price floor, but we will need additional confirmation before changing our directional stance. Conclusion: Somewhat Bearish
Active Options
X 1600 P, X 1550 P, X 1350 P
X 1650/1750 C. spread
Z 1600 P, 1560 P
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| X11 | 1660 | 110 | 114 |
| Z11 | 1660 | 159 | 163 |
| F12 | 1660 | 201 | 205 |
| G12 | 1660 | 235 | 239 |
| H12 | 1660 | 260 | 264 |
| J12 | 1660 | 287 | 291 |
| K12 | 1665 | 308 | 312 |
| M12 | 1665 | 328 | 332 |
| N12 | 1665 | 350 | 354 |
| Q12 | 1665 | 367 | 371 |
| U12 | 1665 | 387 | 391 |
| V12 | 1665 | 402 | 406 |
| X12 | 1670 | 419 | 423 |
| Z12 | 1670 | 436 | 440 |
As of 1:30 P.M.
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