GVZ dropped over 14% on the week as GLD continues to appear range bound. Last week the curve was in a bit of Contango, but things (shape wise) have returned to normal. What I find interesting about GVZ and the futures is the low level of all with all the bullish gold tweets I’ve been seeing. A classic tweet (not mine) was – “Buy gold now thank me next year when it’s over $2000”. GVZ is unusual in that it will often trade higher with big move in GLD in either direction (higher or lower). GVZ is all about magnitude and not direction of moves. With GVZ at such low levels the opportunity to trade an opinion about the future direction of gold is as cheap as it has been in some time. To me that means even if gold is going to $2000, the options market does not see a big move in the near term. However, if you are thinking of catching a gold move, watch GVZ for signs that options players are starting to expect a move.
OVX continues lower as well. I’ve been thinking of this as almost a geopolitical for the Middle East as lower oil volatility makes me think calm should rule the day for a while for this oil producing section of the world. Markets can be wrong, but OVX would creep up with an expectation of some sort of flare up in violence in the Middle East and instead OVX is creeping lower. In a very parallel fashion the futures followed suit last week.