Surge Of After Hours Selling Takes Gold Volatility Index To All Time Low

[Quixote2]

http://www.zerohedge.com/article/surge-after-hours-selling-takes-gold-volatility-index-all-time-low

Surge Of Inexplicable After Hours Selling Takes Gold Volatility Index To All Time Low
Submitted by Tyler Durden on 11/26/2010 20:07 -0500

After HoursBlythe MastersCBOEVolatility


In addition to the rout in the ES, VIX and GC which we pointed out earlier, there were some additional fireworks behind the scenes in today's after hours session. The CBOE Gold Volatility Index, the ^GVZ plunged by the most in over a year, as the index hit an all time low of 15.92 without the underlying making much of a notable move. The most curious aspect of the trade was that the entire dump occured in the AH session. Many were left scratching their heads over what caused this monstrous unwind in long vol positions: was this the unwind of a massive long ES/short GC arb? We don't know, although if rumors that a major fund is planning to stand for delivery of Dec gold turn out to be true, then obviously someone got confirmation today. Keep a close eye out on the GVZ. Should this price level persist on Monday, then the front futures contract will likely surge.

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/gono/GVZ.jpg

A trader whom we managed to reach late in the day had this to say on this stunning move:

Typical course of action for HFT and other commodity pranksters is to shake out new contract holders. They did it with absolute gusto today, shorting thousand of contracts into thin markets. That didn't work. Gold held up. Now, taking into account that peripheral EU spreads are hitting new highs, hedge funds are getting redemption requests etc, why would you go home long ES and short GC? So what they did is they sold ES into and after the close. After that ES/SPY close they can't run these 'start arb' HFT strategies any more that go long S&P and short Gold as well. Gold's closing time is 1:45pm. They had to cover shorts.

If the short covering in paper persists, perhaps the world won't even need the Krieger/Keiser physical PM campaign to destroy Blythe Masters.

And a bonus observation of the gold curve is the Gold February contract, where in the last minute someone bought 2k contracts, which represents 200,000 ounces or about $272MM worth of gold. Not a bad purchase for the last trade on the slowest day of the year.

As usual, we welcome our readers' perspectives on this largely unexpected move.

[Plastic]

And dood for that matter.

[solid]

And dood for that matter.


I think I understand..

The GVZ is the DMZ of the GLD. If the GVZ is large, so is the DMZ, and thus we all need more MRE. If SLV expands with the DMZ or the GVZ, then we need less MRE because SLV will take up the slack.

[Plastic]

And dood for that matter.


I think I understand..

The GVZ is the DMZ of the GLD. If the GVZ is large, so is the DMZ, and thus we all need more MRE. If SLV expands with the DMZ or the GVZ, then we need less MRE because SLV will take up the slack.






In other words buy TP, gotcha....

[JohnQPublic]

And dood for that matter.


I think I understand..

The GVZ is the DMZ of the GLD. If the GVZ is large, so is the DMZ, and thus we all need more MRE. If SLV expands with the DMZ or the GVZ, then we need less MRE because SLV will take up the slack.






In other words buy TP, gotcha....



Wrong. CRASH JP Morgan Buy Silver.

[Sparky]

And dood for that matter.


I think I understand..

The GVZ is the DMZ of the GLD. If the GVZ is large, so is the DMZ, and thus we all need more MRE. If SLV expands with the DMZ or the GVZ, then we need less MRE because SLV will take up the slack.




I must say, this explanation isn't worth a shit.

[solid]

I must say, this explanation isn't worth a sh*t.


I must say, my shit explanation is better than your no explanation!

I don't see you offering any explanations here. ;D Besides, JohnQPublic is right, it doesn't matter anyhow...just buy silver.

[Quixote2]

http://agoracom.com/ir/ECU/forums/discussion/topics/454115-after-hours-gold-activity/messages/1475778#message

"This has potential bullish implications as there was massive deleveraging of a spread involving the gold volatility index trading on the Chicago BOE as long volume positions were dumped after gold had concluded trading for the day. Since there had been rumors that a major fund would call for delivery of Dec gold, it is possible that someone got verification of this in the afternoon and spreads that were short gold scrambled to deleverage prior to the weekend...too late to cover/buy gold, so sell the other side of the spread.

There had been a massive attempt to take gold down today [historically the slowest volume day of the year] with thousands of contracts shorted in to the Comex session. But gold did not collapse and in fact closed the session up some $13.50 off its low and down only about $10 on the day.

Bottom line is that there could be massive gold short covering Monday morning IF the rumor was indeed the reason behind the bizarrre unwind . We will look to see if the Dec. contract takes off when the COMEX session opens at 8:20 EDT. And this could even occur after a strong overnight market in anticipation of such.

A final hint that the rumor could be true was that someone bought 2000 February contracts [200,000 oz =$272 million] just before the COMEX session close...very odd trafe for the slowest trading day of the year. So, perhaps someone with big pockets knew of the deleveraging that was about to occur with long indexes/short gold spreads, and went very long gold in anticipation of fireworks next week.

This all sounds promising but the downside is that all of this is based on an assumption that some large fund is indeed planning on taking a large delivery in December. Take this element away and other explanations come into olay....and I have just wasted 20 minutes of sleep...."

[Sparky]

I must say, this explanation isn't worth a sh*t.


I must say, my sh*t explanation is better than your no explanation!

I don't see you offering any explanations here. ;D Besides, JohnQPublic is right, it doesn't matter anyhow...just buy silver.


You're right; I withdraw my commentary! ;D

[gunDriller]

And dood for that matter.


I think I understand..

The GVZ is the DMZ of the GLD. If the GVZ is large, so is the DMZ, and thus we all need more MRE. If SLV expands with the DMZ or the GVZ, then we need less MRE because SLV will take up the slack.




I must say, this explanation isn't worth a sh*t.


but it's definitely worth a TFA !