FMX | Connect (Reported 11/17/2011)
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 $1,720.20 per troy ounce, a loss of $54.10 for the day.
Market Recap:
Gold futures tumbled on Thursday as the global perception of the European crisis escalated another notch. The commodity sector was devastated on a smattering of foreboding headlines. Yesterday IMF director Antonio Borges resigned abruptly and the organization is prepared to withhold the next tranche of aid from Greece without firm commitment from its politicians. Bond yields surged in recent auctions from Spain and France. Additionally, Hungary announced its intention to speak with the IMF about some form of assistance (note: While a member state, Hungary does not use the euro).
Gold trended lower on Thursday, pummeled by hefty liquidation across the asset classes. Much like yesterday, December gold options were the first item on the agenda and call owners couldn’t find the exit fast enough. Whereas once market participants could envision the possibility of pinning the 1800 strike, today the 1800 Call was sold by the thousands and downside risk became a more pressing concern. Puts were bid, but volatility was surprisingly unresponsive to a $50 sell-off, suggesting the market is still in a call skew. Heavy options volume for April may have contributed to this phenomena with both the 1775 Straddle and some wide fences observing some size.
Directional Commentary:
Options: Options behavior was overwhelmingly bearish and compounded by the upcoming expiration of December options. Calls were offered and puts were bid. Volatility’s almost-tepid response to the move suggests that the market may not be too concerned about a severe sell-off. We wonder if that sentiment will persist $30 lower. Conclusion: Somewhat Bearish
Technical: December Gold sold off violently, breaking through resistance in the 1750 area and trading all the way down to 1711 before settling for a $54 loss. We noted both these areas in our technical analysis and while 1711 held, the next move lower will most likely try for 1680. A breakdown below 1680 would initiate a likely move towards 1600 and possibly the September low of 1635. The near term objective for bulls is a settlement above 1750 but we think bears have the momentum for the moment. Conclusion: Somewhat Bearish
Active Options
Z 1725 C, Z 1800 C
Z 1700 P
G 2000 C
J 1580 P / 1990 C Fence
J 1775 Straddle
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| Z11 | 1720 | 37 | 41 |
| F12 | 1725 | 111 | 115 |
| G12 | 1725 | 154 | 158 |
| H12 | 1725 | 190 | 194 |
| J12 | 1725 | 225 | 229 |
| K12 | 1730 | 252 | 256 |
| M12 | 1730 | 280 | 284 |
| N12 | 1730 | 306 | 310 |
| Q12 | 1730 | 329 | 333 |
| U12 | 1730 | 351 | 355 |
| V12 | 1730 | 369 | 373 |
| X12 | 1735 | 389 | 393 |
| Z12 | 1735 | 409 | 413 |
As of 1:30 P.M.
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End Of Day Straddles
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