Commodity update,
Ole S. Hansen, Head of Commodity Strategy, Saxo Bank
The renewed weakness in gold over the past week has triggered a rise in implied volatility on increased speculation that the current range of trading may be challenged. It is therefore not surprising to find that the skew is heavily geared towards the need for downside protection. The top ten most active trade options strikes have been evenly split between Puts and Calls.
The volatility curve remains heavily skewed towards the downside with out-the-money Puts trading almost six percent above the equivalent out-the-money Calls.
The top ten most traded strikes over the past week are evenly split between Puts and Calls. The strike receiving the most interest was the Jan 2014 Put 1200, last traded at USD 13.70/oz, followed by the Feb 2014 Put 1,150 which was last traded at USD 12.5/oz.
Total open interest on February 2014 Comex Gold options covering an 800 dollar range rose by almost nine percent over the past week to 95,300 contracts. The Put/Call ratio stands at 0.92 which indicates a slight bullish sentiment in the market and is something that goes against the current trend and which could indicate a preference to use options instead of futures to express a bullish view considering the near-term risk of further losses.
