The investors in yellow metal have been skeptic on Fed's rate decision on the back of mixed bag of US economic reports.

Yellow metal far month contracts for December delivery on the Comex division of the NYME traded between $1,106.30 and $1,122.30 an ounce before settling at $1,110.30, down 3.80 or 0.35%. Gold futures closed lower for 6th consecutive session.

Technically, the precious metal has surpassed all major price levels where supply was seen more than demand and for now likely to find support at $1,105.20 levels, if it does not mange to hold these levels then 1096 areas cannot be disregarded.

The strategy is for those risky traders who have this commodity exposure at present and are concerned about a correction and wish to hedge the long spot commodity position. The hedger takes following positions to constructs this strategy:

Write an OTM call option + hold an ITM put option (near month Call & mid month put). Writing OTM calls may likely to fetch certain returns since any abrupt slumps in near future may be taken care by this instrument.

This helps as a means to hedge a long position in the underlying outrights by holding longs on protective put.

Thereby, any declines in this commodity would be taken care by ITM put options since the holder of the put option will have right to sell at predetermined strike price at expiry in case of American style options.

The options will have the same expiration date and similar deltas. In commodities trading it is used for hedging which consists of selling a call and buying a put option.

This strategy protects against unfavorable, downward price movements but limits profits that can be made from favorable upward price movements.