Gold May Struggle To Top $1,200 Ahead Of Options Expiration

London (Nov 20)  Traders suspect that gold might have a hard time reclaiming $1,200 an ounce ahead of an options expiration Monday, while silver may remain around $16 or slightly below.

Meanwhile, some observers say they typically look for a pick-up in volatility afterward when market participants unwind new futures positions they get as a result of the expiry.

Expiration of Comex December options for gold and silver is scheduled for Monday.

A call option gives the holder the right to call, or buy, a specific futures contract at an agreed-upon price during the life of the option.  A put gives the holder the right to sell a specific futures contract at an agreed-upon price. Jockeying ahead of these expirations often impacts prices in the short term and can add to volatility. Of course, this would be trumped if there should be some major breaking news event or the market accelerates through a key technical support or resistance level.

Preliminary CME Group data through Wednesday show that the number of open positions for puts in December gold options was 158,361. Open interest in calls was 370,305.

In the case of gold calls, many positions were established some time ago at strike prices well above current values, said James Ramelli, trader with KeeneOnTheMarket.com, which focuses on options. This means these positions are far out of the money.

“I don’t think there is too much to read off of that,” Ramelli said. “But there is a decent amount of open interest on the $1,200 put line.”

Preliminary CME Group data as of Wednesday show that open interest for puts at this strike price stood at 7,506 contracts.

Source: FORBES