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FMX Gold Options Report: A Focus On The Q 1600 Call Buyer

Tyler Durden's picture




 

From FMX Connect

Summary

June Gold settled at $1517.10 per troy ounce, a gain of $13.60 for the day. Gold went on a rush after the Federal Open Market Committee statement and set new highs this afternoon.

Commentary & Analysis:

Today was a very complex day from an options standpoint. Rather than go through the minutae of what traded where it would be more efficient to simply create a timeline based on the FOMC statement and Bernanke’s press engagement.

In the A.M. the market opened slightly higher and volatility was offered, as is common on slightly higher calls. June calls were the most aggressively offered. Traders squared up positions, moved their calls to puts in risk reversal form and also took the opportunity to sell August volatility since it has been well bid for the last couple of days.

After 10 A.M. the August 1600 Call buyer came back to the market. Between 10-11:00 am that option was bid and bought, but offers were not lifted as they has been previously. The buyer was patient today. Volatility stabilized and drifted higher. June Calls were still being sold and nothing else was aggressively traded. From there the market moved higher and skew changed dramatically to the calls. The August 1600 Call buyer stepped up his purchasing accordingly. At this point the option term structure became efficient and everything caught a bid on the call side.

At 12:30 the FOMC released its statement. The market dipped from 1508 to 1506.60 and it looked like the report was a non-event at best, or bearish at worse. But then over the next 15 minutes the market took off and by the end of the hour was trading 1515. Gold settled higher than it ever has historically before continuing higher still in the afternoon.

From 1:30 onward options moved in lockstep with futures. For example, before 12:30 the August 1400/1600 risk reversal was worth approximately 7.5 dollars for the call hedged with August at 1507. By the end of the day that structure was worth about 8.30 at the same level, almost a dollar move in skew alone. At 2:15 the press conference began and while the Comex was closed, Globex and OTC markets remained busy. While Chairman Bernanke spoke the market traded sideways between 1519 and 1524. Unbelievably to us, during that time period, volatility softened again as longs took the pause as an opportunity to take some profits.

At approximately 2:30 the Q&A began and futures began to rotate higher again. After Bernanke was done speaking we had made a new high of 1530.70 and option volatilities did as well, with August leading the way.

You can see from looking at the curve below that August is the new darling month to own. The difference between this month and other months that catch bids is that this is not from retail buying. There is an institutional player who wants to own options. We don’t know that he is going to sell them yet or at any point but regardless, yesterday’s near pin of 1500 was a gift from heaven for this buyer, as he got to accumulate at a discount.

At about 4:00 the August 1800 Call caught a bid. Several hundred were sold by market makers and spread against the surrounding months.

 

A few data points:

The October 2000 C settled 4.20, went out 5/6.
The December 200 C settled 8.60, went out 10/11.
The August 1800 C settled 4.30, went out 5.5/5.8.

Active Options

M 1400 P
M 1550 C, M 1600 C
Q 1600 C
Q 1800 C


ATM Volatility Curve:

image
*Volatilities post-Bernanke statement

Volatility Smile:

image

***From NYMEX Settlement

 

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Wed, 04/27/2011 - 19:53 | 1214184 I only kill chi...
I only kill chickens and wheat's picture

Is gold the new silver bitchez

Wed, 04/27/2011 - 20:40 | 1214342 Ahmeexnal
Ahmeexnal's picture

NIOBIUM !!!!

Thu, 04/28/2011 - 00:28 | 1214840 rocker
rocker's picture

They, rare earths, will do well too.  China has dictated that.  The FED just shit on the dollar again. You are learning.

Wed, 04/27/2011 - 19:54 | 1214185 Turd Ferguson
Turd Ferguson's picture

Perhaps the "institutional buyer" is a closet Turdite...

http://tfmetalsreport.blogspot.com/2011/01/1600-gold-by-june-10-2011.html

Wed, 04/27/2011 - 20:42 | 1214352 Youri Carma
Youri Carma's picture

Interesting. Call made on 21 January 2011, by Turd Ferguson (Along The Watchtower) $1600 on or before 6/10/11

"IF I'M WRONG, I'M SHUTTING DOWN THIS BLOG AND GOING AWAY, NEVER TO BE HEARD FROM AGAIN as I will have proven myself to be of little value.

If I'm right...well, let's just say it would be perfectly appropriate for you to hit the "Feed The Turd" button every day for the rest of your life."

Wed, 04/27/2011 - 21:11 | 1214446 Pool Shark
Pool Shark's picture

 

Only $70 to go.

After Ben uttered the "I" word today, we may see $1600 by 5/10/11...

 

Wed, 04/27/2011 - 19:57 | 1214204 I only kill chi...
I only kill chickens and wheat's picture

Hi Turd, moving to new metals, PbCuZn

Wed, 04/27/2011 - 20:06 | 1214220 Frank N. Beans
Frank N. Beans's picture

children, there will be a test on this tomorrow.

Thu, 04/28/2011 - 00:29 | 1214851 rocker
rocker's picture

For sure, that's the FED, Godman Shafts, doing God's work after the 8:30 data.

For those who don't get it. The FED is 99.9% owned by Goldman Shafts. The banksters Cartel lives on.

Wed, 04/27/2011 - 20:06 | 1214221 HUGE_Gamma
HUGE_Gamma's picture

1600 thats like 3% otm

BFD

Wed, 04/27/2011 - 20:10 | 1214222 HUGE_Gamma
HUGE_Gamma's picture

^^^
test 1600 tomorrow?

Wed, 04/27/2011 - 20:18 | 1214254 chump666
chump666's picture

Gold is trailing the AUD now, looking at 1.10USD

All overbought, if it is an institutional buy it's a bull trap.  Cheaper would be puts.

Everything is too bullish.

Wed, 04/27/2011 - 20:20 | 1214259 chump666
chump666's picture

say there are stops at 1.10 AUD and they are hit, 100% gold will get to 1600

Wed, 04/27/2011 - 22:53 | 1214696 Mentaliusanything
Mentaliusanything's picture

In one year the AUD has gone from 81c/USD to 1.10c/USD - 35% gain. Gold has gone in the same time period from USD $1170  to $1527  - 31%gain.

I'm losing, I'm not happy and Its going to end badly for the USA as "Transitory" inflation makes you pay.

Death is a "transitory" state.

Reserve currency meet -- my Ass

Thu, 04/28/2011 - 03:15 | 1214989 chump666
chump666's picture

Oh yeah we are totally F*cked, I mean you can offset inflation with stocks.  But Asia is paying the US bills and the thanks they get is inflation.  Gonna end badly.

The AUD is a short of the century, that will sell from internal shock.  gold will correct too as will silver, but that is dip buying.  i think if china pops they print and then as faber says...war.  meantime energy stocks (gas), metals (non industrial), some stocks.

the AUD is closing in on 1.10 which is bizaree and worrying means the USD is a c-hair away from a crisis.

Wed, 04/27/2011 - 20:52 | 1214386 tmosley
tmosley's picture

NOTHING is bullish.  The dollar is collapsing.  Other fiat is also collapsing, just at different rates.

Wed, 04/27/2011 - 21:03 | 1214423 chump666
chump666's picture

Everything is bullish that's the problem, crap currencies show crack up booms.

Thu, 04/28/2011 - 09:17 | 1215453 Overflow-admin
Overflow-admin's picture

Must take in account the "Bernank Butterfly Effect"

Wed, 04/27/2011 - 20:35 | 1214286 bob_dabolina
bob_dabolina's picture

So, to sum:

An institutional investor is buying calls on gold.

boom/zing/bang

What would be cool is if we knew who...

...dollar seeing biggest sell-offs during Asian trading

zing/zang/splat

In sum:

Badabing badaboom

could it be CIC?

Wed, 04/27/2011 - 22:05 | 1214584 magis00
magis00's picture

Is there a way for us 'Merhikuns to get a foot in the door of an asian exchange (like Hong Kong) so we can benefit from the melt-up-overnight/slam-down-in-the-morning trade?

Thu, 04/28/2011 - 00:46 | 1214867 bob_dabolina
bob_dabolina's picture

Yeah...foresight

You can catch it on the foreskin 

Wed, 04/27/2011 - 23:04 | 1214720 fmxconnect
fmxconnect's picture

No. It is definitely a bank prop desk either acting on information it has or it is acting as Broker for a large player who is bearding his business. 

Thu, 04/28/2011 - 00:55 | 1214857 bob_dabolina
bob_dabolina's picture

Uh...

So how am I wrong if you're saying it's a bank prop acting on information from a large player? Is CIC a large player?

small fish, big fish; same diff/no diff....if you saw it ;)

fmxconnect, you can beard me any day....you guys are the shiiiiit.

Thu, 04/28/2011 - 03:21 | 1214993 chump666
chump666's picture

thats correct, you don't get major USD selling all asian session if they aint setting for a knock out call...obviously on gold and the AUD at 1.10

stange days. waiting for the USD 0.71 slip...a crisis trade after that, market will keep shorting unless FED is forced to raise rates.  Bernanke is simply mad

Wed, 04/27/2011 - 20:24 | 1214290 nah
nah's picture

exciting stuff... is everyone talking their book or is it real this time

.

gold 3k or .gov raises interest rates choosy mom style... i just dont know what to think

Wed, 04/27/2011 - 20:35 | 1214319 Atomizer
Atomizer's picture

Daily Treasury Statement

https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&fname=11042600.pdf

Treasury Report on Receivables and Debt Collection Activities 

http://www.treasurydirect.gov/govt/reports/pd/pd_tror.htm

Wed, 04/27/2011 - 21:16 | 1214471 SilverDoctors
SilverDoctors's picture

That was a nice pickup.

Citibank is letting us lock in physical silver at $48 for Feb 2013 cotton fiat! Sounds like an even better pickup!

http://silverdoctors.blogspot.com/2011/04/would-you-purchase-silver-toda...

Thu, 04/28/2011 - 00:33 | 1214855 rocker
rocker's picture

Very Nice. Zh Rules.

Wed, 04/27/2011 - 23:05 | 1214722 lolmao500
lolmao500's picture

In other news, dollar is collapsing now at 72.87.

Wed, 04/27/2011 - 23:27 | 1214759 John Law Lives
John Law Lives's picture

Look at the USD plunge vs. the EUR

EUR-USD 1.4870 at 11:30pm (Eastern) on 4-27-2011

http://www.bloomberg.com/markets/currencies/

goddam insane Chairsatan Bernank

Wed, 04/27/2011 - 23:32 | 1214763 fswalker
fswalker's picture

Why would anyone be buying 1600 calls after such a tremendous rally? Hedging a decent sized short position for one ;). For all you 'GOLD will be at $3k / ounce in a parabolic rise' - fucking idiots, how about you take your heads out of your asses, unload some of that gun powder you've shelved in your rectum and lay off the canned chilly beans for a while. The fact we're in a bull market rally means exactly that. Key point: MARKET! Supply and demand / Bernank / Comex raids and the motherfucking Blyth of Bylth's becomes irrelevant when you're playing a game against the big boys. I know its pretty hard to belive that such a thing exists especially when all you've been focusing on is trying to convert the majority of your assets into the holy grail of holy grails.  The fact is prices have been driven by a simple shift in focus from one asset group to another. Gold / Silver / AUD etc have trend followers written all over it, and while i can gladly admit I've been a part of that group, the time has finally come to look around and re-evaluate your gains, reap the fruits of your so called labour and stand aside for a while. Huh?? An exit strategy? I'm sure many of you wouldn't have a fucking clue what that is, blindly following this growing cult of 'shiny metal hoarders' , waiting for the world to end and all fiat currencies to be pegged to your precious metal once more.

Don't get me wrong, the markets need sheeple like you. At the end of the day who do you think will be holding long positions when most commodities come crashing down? It sure as hell ain't gonna be JPM or GS that's for sure.

Now before i get bombarded with death threats I want to get one thing straight. I am not here to simply call a top in commodities. Just a friendly reminder that the markets are controlled by people with the ability to move mountains if they wish. Think about it: How many times have you made the perfect long term investment decision in your life vs. the trillions upon trillions of capital floating around, managed by pros looking to catch you out especially when public sentiment is at an all time high?? 

Wed, 04/27/2011 - 23:44 | 1214790 Seer
Seer's picture

So, you're saying to exchange gold for falling USD?

Thu, 04/28/2011 - 00:55 | 1214879 rocker
rocker's picture

No, I thinks the fucking asshole wants you to buy stocks just before they crash or correction. Somebody has to buy the market's over bought bid. What a dick head. The dollar is shit until they raise rates.  Got to love the strong dollar policy talk as the dollar gets ass wiped again. We are Japan and Zimbabwe all in one.

What will butt head think when we see a 5 digit print on Gold.  The Bernankee will make it happen. We might see 16,000 dow. But I believe Gold will surpass 2,000 to 3,000 first. Then the sky is the limit. I believe Silver still might be the biggest winner since it was depressed the longest of all commodities. Time for the Morque to go to hell. The talking head are already saying how it's justified because of industrial demand. Shit, Roman ancient coins were made and treasured with Caesar's face on them. We all know what happened to Rome. But silver lives on with or without the great Roman Empire. Yes, Silver is the Poor Man's Gold. And I think we have plenty of poor people who will never trust the stock market and the cronies who manipulate it.

Thu, 04/28/2011 - 02:10 | 1214938 fswalker
fswalker's picture

Just a word of caution for an overly bullish outlook. The same goes for USD shorts. Do you really believe in a total USD collapse with so much wealth being tied up in it? To me it seems absurd that people would bet on such a scenario at these levels. Markets are cyclical in nature, always have been and always will be. To believe and invest in a TOTAL bullish/bearish outlook will catch you off-guard unless you have a safe / planned exit strategy.

Thu, 04/28/2011 - 00:52 | 1214878 JPDG
JPDG's picture

 Just a friendly reminder that the markets are controlled by people with the ability to move mountains if they wish.

 

****

 

Of course.  Don't you know that the IMF wants to kill the dollar?  

 

It's not like they're doing this accidentally.  *shrug*  

Thu, 04/28/2011 - 02:24 | 1214947 fswalker
fswalker's picture

Doing what exactly?? Dumping the dollar in search of higher yields and a "safer" bet? How short sighted does one need be to belive this is going to be a never ending story? So what the Dollar Index is about to reach all time lows? If anything, it is beneficial for US during these fragile times of recovery. I dont see how that would in any way, shape or form mean a total dollar colapse. People have a tenency to blow these facts out of proportion especially when they have vested invest in the opposite direction. A trend is a trend. No two ways about it. The shift from USD to commodities is and has been clear as daylight. Once the every man and his dog jumps on board though do you still think this trend will continue?

Thu, 04/28/2011 - 07:59 | 1215201 Robslob
Robslob's picture

fswalker...only a 14 weeker here at ZH...give him at least 6 more weeks until he converts or disappears under a new identity.

 

Wed, 04/27/2011 - 23:50 | 1214803 Cruzan Stomp Revival
Cruzan Stomp Revival's picture

"The fact is prices have been driven by a simple shift in focus from one asset group to another."

Gold has been driven to 10 straight years of gains by... momo rotation from other asset groups? Me thinks not.

I think PMs are telling us something very important about integrity of financial markets, fiscal policy, monetary policy, competence of public and business elites, viability of fiat currencies, finite resources, etc.

It's a vote of no confidence in the status quo and I'm voting early and often.

Thu, 04/28/2011 - 01:00 | 1214887 rocker
rocker's picture

+10   That no confidence factor will never buy the market again. Never. I watch every day and it is unbelievable how much they manipulate stocks. Up Down, Up Down, just what is the right price.  Most have a outrageous PE that is not justified.

Wed, 04/27/2011 - 23:58 | 1214812 Temporalist
Temporalist's picture

"I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve."

While the above is from Admiral Yamamoto after bombing Pearl Harbor I believe this sentiment is what the banksters are starting to realize.

Thu, 04/28/2011 - 01:09 | 1214894 rocker
rocker's picture

Correct. The sleeping giant is not just the US today. The world has figured out what Big Ben is doing. Since we are loosing #1 status we will be forced to yield in many ways not understood yet.

Thu, 04/28/2011 - 01:22 | 1214906 vainamoinen
vainamoinen's picture

"not understood yet"

Quite -

Thu, 04/28/2011 - 01:46 | 1214925 bob_dabolina
bob_dabolina's picture

blah blah and caca

That's all this article is.

Seriously...what's the point of this article other than publcity?

Thu, 04/28/2011 - 07:19 | 1215151 Landau
Landau's picture

projection for gold is $1800 for end of the year

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