FMX | Connect (Reported 10/06/2011)
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 $1,653.20 per troy ounce, a gain of $11.60 for the day.
Market Recap:
Gold continued its uptrend on Monday, drawing support from the EBC’s announcement that it would purchase additional bonds to support the EU. The euro was stronger, the dollar was weaker and Federal Reserve began to sell short-dated Treasuries as part of its efforts to flatten the yield curve.
Speculative interest continued to accumulate on Thursday, with more calls and call spreads being bought November through April. The fervent desire for puts has started to slacken and fences are leaning ever so slightly back towards the calls. Volatility was lower, and back-month volatility is staying firmer where it is eroding in the front months. This is a commentary on the long term sentiment for the market, and from what we can see, expectations remain high. This was expressed today through the sales of the November 1600 put and April 1450 put, and through the purchases of the back month calls and straddles.
Directional Commentary:
Options: Options behavior continued the trend from Wednesday, with fences creeping towards calls and front-month volatility underperforming relative to the backs. While the long-term optimism this implies is nothing new for this market, options are signaling that gold may have moved on from its recent floor and is looking to rally in the near-term. As always, we hesitate to draw too strong of a conclusion, but bulls seem to be establishing a new foothold. Conclusion: Mildly Bullish
Technical: December gold advanced nearly $12 on the day, adding to yesterday’s gains but falling short of the top of the current trading range (1680). The near-term rally is likely to test the top of the range, and maybe even break through it. Even so, we are looking for a settlement of 1750 or higher to negate the current bear trend and initiate a possible reversal. We still think gold is still likely to retest the 200-day moving average in the intermediate term, with declining open interest and weakening oscillators driving further consolidation. Our first target to the downside is 1585, followed by the 200-day moving average at 1535. While gold may trade sideways to higher over the next several sessions we still see little basis for a sustained rally, and would not be buyers of strength. Conclusion: Bearish
Active Options
X 1600 P
X 1700C, X 1750 C
Z 1700 C
J 1450 P/1980 C Fence
M 1550 Straddle
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
GC | | | |
| Future | Bid | Offer |
X11 | 1655 | 98 | 102 |
Z11 | 1655 | 152 | 156 |
F12 | 1655 | 201 | 205 |
G12 | 1655 | 234 | 238 |
H12 | 1655 | 262 | 266 |
J12 | 1655 | 291 | 295 |
K12 | 1660 | 315 | 319 |
M12 | 1660 | 337 | 341 |
N12 | 1660 | 360 | 364 |
Q12 | 1660 | 380 | 384 |
U12 | 1660 | 401 | 405 |
V12 | 1660 | 417 | 421 |
X12 | 1665 | 435 | 439 |
Z12 | 1665 | 453 | 457 |
As of 1:30 P.M.
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