FMX | Connect (Reported 10/12/2011)
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 $1,682.60 per troy ounce, a gain of $21.60 for the day.
Market Recap:
Gold launched to fresh weekly highs on Thursday, drawing support from a weakened dollar. That the risk-on trade was back on the table speaks to the fundamental ambiguity of the markets right now and for many, an increased likelihood of a QE3. Slovakia rejected a vote to approve additional EFSF funding last night, but the overwhelming consensus is that it will be approved shortly and should be no cause for additional anxiety.
Bullion is observing a modest influx of speculative interest as it approaches $1,700 an ounce. While the pace of the rally has been orderly so far, gold is approaching a potential break-out area and many market participants are eager to see a departure from the range-bound trading of late. Today puts were offered and calls were bought across the breadth of the term structure, and in some cases quite literally. For instance, December 1550 puts were sold to allay the cost of the December 2012 2000 Call. There was also some speculative call buying in the front months (the November 1770 Call, for one). Volatility was in more than 1% on the day.
Directional Commentary:
Options: Recent options activity is mildly bullish and more indicative of an orderly rally than an explosive one. Front-month puts are being offered, and the trend in fences has been grudgingly toward the call. We should note that November and December calls are offered cheaply, and much of the bullish options sentiment is reserved for 2012. One final thing, while options behavior is encouraging, if volatility continues to come in as the market rallies, speculative longs may find themselves right on the market direction and still losing money owning calls. Conclusion: Mildly Bullish
Technical: December Gold traded to 1694 on the highs, but failed to break out decisively. Bullion is currently trading just above the top of its recent trading range, and $5 below the 20-day moving average. If gold can break through resistance at 1685 it may rally to 1750 rapidly, mirroring the September 23rd washout on its way back up. If gold fails at 1685 it is likely to consolidate sideway to lower, first looking to retest support at 1630, and from there, potentially probing all the way down to the 200-day moving average near 1542. Conclusion: Neutral (Bearish Intermediate)
Active Options
X 1770 C
Z 1700 C
Z 1550 P
G 1800 C
G 1600P, 1400 P
Z12 2000 C
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| X11 | 1682.6 | 66 | 70 |
| Z11 | 1682.6 | 122 | 126 |
| F12 | 1684.6 | 169 | 173 |
| G12 | 1684.6 | 203 | 207 |
| H12 | 1686.3 | 231 | 235 |
| J12 | 1686.3 | 262 | 266 |
| K12 | 1687.9 | 287 | 291 |
| M12 | 1687.9 | 310 | 314 |
| N12 | 1689.6 | 335 | 339 |
| Q12 | 1689.6 | 355 | 359 |
| U12 | 1691.4 | 378 | 382 |
| V12 | 1691.4 | 394 | 398 |
| X12 | 1693.7 | 412 | 416 |
| Z12 | 1693.7 | 429 | 433 |
As of 1:30 P.M.
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