FxWirePro: Trading Turnover Monitor of Bullion and Treasury - OTC Updates and Options Strategies for Bullion Market

Gold price in minor trend is frightening to wipe-off all of its 2019 gains, currently trading at $1,277.99 levels, the latest indication is that rising confidence in the world economy is pushing investors away from assets typically considered safe.

Volumes are monthly and the Turnover ratio is annualized (monthly trading volume annualized divided by the amount outstanding, refer 1stchart). UST Cash is primary dealer transactions in all US government securities. UST futures are from Bloomberg. JGBs are OTC volumes in all Japanese government securities. Bunds, Gold, Oil, and Copper are futures. Gold includes Gold ETFs. Min-Max chart is based on a Turnover ratio. For Bunds and Commodities, futures trading volumes are used while the outstanding amount is proxied by open interest. The diamond reflects the latest turnover observation. The thin blue line marks the distance between the min and max for the complete time series since Jan-2005 onwards. Y/Y change is the change in YTD notional volumes over the same period last year. 

OTC Updates for Bullion Market: Please be noted that the positively skewed IVs of 1m XAUUSD contracts are well-balanced indicating both downside and upside risks. One could see the bullish neutral risk-reversal setup. 

The above risk reversal numbers have been known as a gauge of gold’s underlying market for bullish opportunities. Well, we know that options are predominantly meant for hedging a probable risk event in the future.

Options Strategy (3-Way Straddles Versus ITM Puts): 

Considering non-directional movements in the underlying spot gold (refer above technical chart and IV nutshell), 3-way straddles are advocated, the strategy comprises of at the money +0.51 delta call, at the money -0.49 delta put options and short in the money put options of narrowed expiry with a view of arresting potential FX risks on either side but capitalizing on minor upswings in the near-term. Hence, on hedging grounds, buy 1m ATM delta puts and ATM delta call of similar tenor and short (1%) in the money put options of 1w are advocated.Courtesy: Sentrix & Saxo

Currency Strength Index: FxWirePro's hourly EUR is at -36 (bearish), hourly USD spot index is inching towards 21 levels (mildly bullish), while articulating at 12:01 GMT. 

For more details on the index, please refer below weblink:

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