Attention Again Goes in Put Options (Bearish Bets) as Gold Hits its 12-Day Low

Gold Hits its 12-Day Low
  • Gold’s price knock down to 12-day lows during the night trade, indicating an end of the corrective bounce from $1,196.
  • This Price Drop of Gold seems to have revived interest in Put Options.
  • Gold knock down to $1,212 in the overnight trade – a point last seen on Nov. 16 – as the greenback picked up a bid on hawkish comments by Fed’s Vice Chair Clarida.
  • Notably, the drop to 12-day lows point towards the counteractive bounce from the Nov. 13 low of $1,196 has likely ended at $1,230 and the bears have reclaimed control.
  • Adding credence to that view is the increase in implied instability premium for the XAU put options. As of writing, the XAU/USD three-month 25 delta risk turnarounds are trading at -0.125 in support of puts vs 0.325 in support of calls seen on Nov. 26
  • The negative reading point towards the implied instability premium (or deAAmand) for put options is more than that for calls.
  • So, it appears safe to say that the options market has rotated bearish on the yellow metal. In other words, investors are likely expecting a deeper fall in gold and hence are buying downside defense.