FMX | Connect (Reported 10/17/2011)
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 $1,676.60 per troy ounce, a loss of $6.40 for the day.
Market Recap:
Gold traded to a new weekly high over the weekend but finished the day marginally lower. Last week markets were enthused by a fresh wave of Euro optimism but sentiment took a more dour turn over the weekend, leading German Chancellor Angel Merkel to state that there will be no quick resolution. G20 ministers still have a lot of ground to cover before the November 3rd meeting, and this was reflected in the dollar index’s surge higher.
Volatility opened the day firmly, nudged higher by continuing European anxieties and some disquieting U.S. economic data. After selling off from its overnight highs, gold tested the supporting trend line, prompting fears of a wash-out. Front month calls were offered and puts were bid, particular in December. November options have less than two weeks until expiration and market participants have started to clean up open interest. There was also interest farther back in the term structure, with calls, puts and straddles trading through December 2012. One of the more sizeable trades was the purchase of the August 2700/3300 1x2 Call spread by a dealer.
Directional Commentary:
Options: Today’s options activity was bearish. Front-month volatility and put skew outperformed the back months, suggesting rising fears of a near-term sell-off. Calls were also offered. Much like last week, the expectations of continuing rallies are orderly, but sell-off concerns seem to have increased. Conclusion: Somewhat Bearish
Technical: After trading to a new weekly high in the overnight session, Gold fell from 1698.70 and tested the bottom of the wedge. As we mentioned last week, gold is currently in a rising wedge, a bearish continuation pattern, and should the pattern hold, gold is likely to break lower in the next 10 trading sessions. While gold skirted beneath the bottom of the lower trend line briefly, it was not sufficient to initiate the breakdown. We will say this however; it seemed very close and the market seemed very sensitive to vulnerability in that area. We will be looking for gold to retest and break through the bottom of the trend line decisively, and if successful to 1630. Ultimately, a sustained sell-off could lead gold to retest the 200-day moving average near 1545 and perhaps a bit farther. On the other hand, if bullion can rally and settle above 1705 (the top of the wedge) or 1750 (the 50-day moving average) we may see some fresh buying momentum come into market. Conclusion: Bearish
Active Options
X 1675 P
X 1725 C, Z 1700 C
Q 2700/3300 1x2 Call Spread
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| X11 | 1676.6 | 50 | 54 |
| Z11 | 1676.6 | 106 | 110 |
| F12 | 1678.6 | 152 | 156 |
| G12 | 1678.6 | 185 | 189 |
| H12 | 1680.1 | 213 | 217 |
| J12 | 1680.1 | 243 | 247 |
| K12 | 1681.7 | 264 | 268 |
| M12 | 1681.7 | 286 | 290 |
| N12 | 1683.4 | 311 | 315 |
| Q12 | 1683.4 | 332 | 336 |
| U12 | 1685.2 | 352 | 356 |
| V12 | 1685.2 | 370 | 374 |
| X12 | 1687.4 | 387 | 391 |
| Z12 | 1687.4 | 405 | 409 |
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.