image FMX | Connect (Reported 11/04/2011)

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 $1,756.10 per troy ounce, a loss of $9.00 for the day.


Market Recap:

Gold drifted lower on Friday, as investors booked profits and reduced risk ahead of the conclusion of the G20 meeting and unforeseen weekend events. Traders also noted some positive revisions to August and September payrolls, as well as a dip in the U.S. unemployment rate to 9%.

Gold trading was largely uneventful on Friday. ATM calls and straddles were offered. Not only were volumes low, gold traded only a $16.70 range. Volatility was down across the term structure, with December taking the worst of it, coming in 2.7%. One of the more interesting trades of the day was the purchase of the April 1800/1975/2300 Call Butterfly. This is a sophisticated directionally play, but still carries very large risks for investors. For one, a rapid move higher can make this position expensive to hold even if it finishes as a winner, because the buyer is short the volatility of the 1975 Calls.

 

Directional Commentary: 

Options: Volatility was broadly lower, but put and call skew was largely unchanged. The trend in options this past week has been bullish, and nothing in today’s activity changes that. We should note the possibility of a volatility rebound on Monday, as many traders are biased to sell theta ahead of the weekend. Conclusion: Slightly Bullish

Technical: December gold finished down on the day but was mostly unchanged from a technical standpoint. Today’s low was 1749.90 and suggests there may be buying support at the 1750 strike. The market remains in a near-term bull trend, and we expect the rally to extend to 1789 before encountering increased resistance. Above 1800, bulls may try attempt to push the market back to all-time highs of 1923.40. The first objective to the downside is 1710, followed by the 20-day moving average at 1692.60. Conclusion: Somewhat Bullish

 

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Active Options

Z 1850 C

G 1830 C

G 1700/1650 P. Spread

J 1800/1975/2300 Call Butterfly

 

ATM Volatility Curve:

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As of 1:30 P.M.

 

Volatility Smile:

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***From NYMEX Settlement

 

End of Day Straddles

GC      
  Future Bid Offer
Z11 1755 69 73
F12 1760 131 135
G12 1760 172 176
H12 1760 205 209
J12 1760 238 242
K12 1760 265 269
M12 1760 290 294
N12 1765 317 321
Q12 1765 339 343
U12 1765 362 366
V12 1765 380 384
X12 1765 400 404
Z12 1765 420 424

As of 1:30 P.M. 

 

 

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