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Gold Options Report – September 21, 2011
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Market Recap:

After two days of suspense, the Federal Open Market Committee concluded its meeting much as expected:

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative.

If anything, the market may have been disappointed that the Federal Reserve didn’t go far enough, with the dollar rallying and equities selling off in the immediate aftermath. Absent further hints of a QE3, investors will return their focus to the specter of a Greek default, and the faltering economic indicators out of the U.S. Today’s existing-home sales were a welcome surprise however, rising from a seasonally-adjusted 4.67 million homes in July to 5.03 million in August.

Gold traded unchanged most of the day before selling off the in the wake of the FOMC press release this afternoon. While options were sold ahead of the new, most notable the October 1850 Call and December 1850 straddle, the full effect of the selling didn’t really resolve itself until after the meeting. Volatility was lower on the day and continued to contract going into the Globex close.