This Week in Gold and Oil Volatility – 7/19/2013

Despite all the bullish and bearish commentary the price of gold seems to be calming down a bit as the SPDR Gold Shares ETF (GLD – 125.11) is finding a home in the mid 120’s.  The high low range was the narrowest it has been since six weeks ago.  I’ll revisit this in just a minute – but the narrow range brought GVZ down to the lowest levels since early June as well.  Despite the narrow range for GLD and low level of GVZ, gold traders may want to be prepared for some movement next week.  The last time GLD was in this narrow of a range for the week GLD dropped over 10% for the following two weeks.  Also, GVZ climbed back up to the 30’s just two weeks later.  We will see soon if this pattern repeats or if the daily price changes for gold will continue to stay in a narrow range which would probably result in GVZ returning to the teens in short order.

The more newsworthy market the United States Oil ETF (USO – 38.45) reached its highest levels in fourteen months.  This came on the heels of oil futures topping 108 on the week as well.  The new highs in oil were a little more orderly than some of the geopolitical spikes that have occurred in the past few weeks so OVX dropped based on this action.  The curve twisted a bit to end in slight contango for the week.  OVX and all futures closed with the same 24 ‘handle’ as we traders put it – this is a first from my recollection for any of the tradable volatility markets.

OVX GVZ

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…

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