FxWirePro: Gold lackluster buying interest ahead of Fed’s event – derivative updates

From the above table you can observe the delta risk reversal has shifted into red zone again with increased volatility. Further the positions constructed for bull overview will increase in value with time decay.

Precious metal is slightly down at the start of the new week after their prices fluctuated - in some cases considerably - on Friday. Gold dipped temporarily below the $1,100 per troy ounce mark. In euro terms, gold dropped to €970 per troy ounce to hit its lowest level in over eight months. Market participants will be focusing their attention this week on the important meeting of the US Federal Reserve, which will be announcing on Thursday whether it will be increasing interest rates before this month is out. The uncertainty which will continue until this announcement is made should prevent the gold price from making any significant gains in our opinion, meaning that it will probably tread water for the most part.

On the verge of fed's meeting that is scheduled on 17th probably put an end for rate speculation which was long lasting, hence commodity markets likely to remain edgy and bullion market cannot be an exception, so, buy 15D At-The-Money delta call option and simultaneously short 2 lots of 15D At-The-Money put options with positive theta values. As we anticipate this precious metal to fall in short to medium run to take support near trendline at around 1060 levels but as a matter of hedging in long run, this strategy involves buying a number of ATM calls and double the number of puts. More proportion of puts maximizes the profitability when the precious metal slides.

Speculative financial investors are doubtless also responsible for the recent fall in the gold price, as they reduced their net long positions by a third to 26,800 contracts in the week to 8 September, solely as the result of an increase in short positions. Because the price has fallen further since the reporting date, net long positions are likely to be even lower by now. Net long positions in silver were increased, on the other hand, though this lent only brief buoyancy to its price.