FMX | Connect (Reported 11/30/2011)
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
February Gold settled at $1,750.30 per troy ounce, a gain of $31.40 for the day.
Market Recap:
Gold traded higher on Wednesday, buoyed by a coordinated central bank effort to reduce the cost of borrowing dollars and improve liquidity for ailing institutions. Equity markets took an additional boost from some robust economic data, including much stronger than expected U.S. pending home sales and new hires (according to the ADP survey).
Gold surged sharply higher this morning on the central banks’ announcement they were reducing the cost of borrowing dollars. The $30 rally brought a fresh influx of demand accompanying it, coaxing both speculators and dealing banks to add to their positions. Short-dated calls and call spreads remain popular and stand to benefit the most from an increase in volatility going higher. Fences moved toward the calls on the day, and saw one dealer selling the February 1600 P to fund the purchase of the 1900 Call. Put activity was also vibrant with some market participants cleaning up and more skeptical customers positioning themselves for a reversal. Volatility was slightly lower on the day.
Directional Commentary:
Options: Options behavior was decidedly bullish, with fences moving toward the Call across the term structure. Volatility is yet to perform in the rally and is unlikely to impress if the market remains orderly. If Gold continues to rally towards all-time highs the market may transition back to a call skew. Conclusion: Somewhat Bullish
Technical: February Gold rallied, recording slightly more than a $31 gain on the day. Yesterday we noted that the market was well positioned to continue its rally, pointing to support from the 100-day moving average and projecting an objective of 1770.5, the November 17th high. Bears should be looking towards support at 1705, and from there near 1670. We think the near-term trend remains bullish and would look for futures to continue higher over the next several trading sessions. Conclusion: Somewhat Bullish
Active Options
F 1700 P
F 1800 C
G 1850 C
G 1600 P / 1900 C Fence
J 1650 / 1450 Ratio Put Spread
ATM Volatility Curve:
As of 1:30 P.M.
Volatility Smile:
***From NYMEX Settlement
End of Day Straddles
| GC | | | |
| | Future | Bid | Offer |
| F12 | 1750 | 78 | 82 |
| G12 | 1750 | 128 | 132 |
| H12 | 1755 | 167 | 171 |
| J12 | 1755 | 206 | 210 |
| K12 | 1755 | 235 | 239 |
| M12 | 1755 | 263 | 267 |
| N12 | 1760 | 292 | 296 |
| Q12 | 1760 | 316 | 320 |
| U12 | 1760 | 340 | 344 |
| V12 | 1760 | 359 | 363 |
| X12 | 1765 | 380 | 384 |
| Z12 | 1765 | 402 | 406 |
As of 1:30 P.M.
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