Options expiry manipulation of the gold price in one chart

[swissaustrian]

In case anybody doubts that the gold market is beeing manipulated in anticipation of options expiries:
Chart is from Jesse´s café Americain.

[dereksatkinson]

I agree it's criminal.

[PMBug]

Looks like the amplitude of the drops since August are getting steeper. Desperation?

[swissaustrian]

Looks like the amplitude of the drops since August are getting steeper. Desperation?

Maybe. They could be preparing for the inception of the various Asian exchanges...

[ancona]

All right All right......nothing to see here.....move along.

[dereksatkinson]

Looks like the amplitude of the drops since August are getting steeper. Desperation?

Less liquidity. The MF global problems are definitely causing more issues than I originally anticipated.

[DCFusor]

Well, if you have a nice predictable indicator like this, with known relative timing, you can sure clean up trading - this seems to have a pretty high hit rate, only a couple times would you not have made good money going short just before, then covering and back to long just after. Good money management is always key, and with it done right, you don't need much better than a 50% good call rate to clean up. Might be criminal manipulation, but if it's this transparent, we can make money off those crooks - justice of a sort.
And this is much better than 50%.

And oh, real nice chart work, SA!

[swissaustrian]

Well, if you have a nice predictable indicator like this, with known relative timing, you can sure clean up trading - this seems to have a pretty high hit rate, only a couple times would you not have made good money going short just before, then covering and back to long just after. Good money management is always key, and with it done right, you don't need much better than a 50% good call rate to clean up. Might be criminal manipulation, but if it's this transparent, we can make money off those crooks - justice of a sort.
And this is much better than 50%.

And oh, real nice chart work, SA!

Not my chart. Got it from Jesse´s café Americain
I´m actually going short every month since August 2007. Have described it here: http://www.pmbug.com/forum/f3/watch-...-217/#post1196
I´m always going short 5 days before op-ex. Sell my puts on op-ex at 10 am ET (London gold fixing). Gave me a 40 % outperformance to spot gold over the years. I´ve bought physical with the profits.

[dereksatkinson]

Well, if you have a nice predictable indicator like this, with known relative timing, you can sure clean up trading - this seems to have a pretty high hit rate, only a couple times would you not have made good money going short just before, then covering and back to long just after. Good money management is always key, and with it done right, you don't need much better than a 50% good call rate to clean up. Might be criminal manipulation, but if it's this transparent, we can make money off those crooks - justice of a sort.
And this is much better than 50%.

And oh, real nice chart work, SA!

The problem is that it effectively ruins the options market which is integral to those professionals who use it to hedge. Mining companies do use futures and options to decrease volatility of their balance sheet too...

[DCFusor]

SA - sounds like a great plan, looking at the data - I may add it as one of my strategies (I do different stuff in different accounts as a learning tool). And there are charts aplenty out there to choose from, so even if you didn't make it, you chose wisely. Some of the ones I use don't show this as dramatically, it doesn't leap out at you as well as it does in that one.

I don't know that anything predictable ruins options markets, there's no requirement to roll them at any given instant, right? Not to make a pun, but I thought you had the option...
Further, were I a miner, I'd just not sell gold on the dips...same as I do trading. Or I'd sure try to find some reason not to ship/book it just then.

I think miners do and don't use options to hedge, according to management philosophy. In fact, if trading their stocks, finding that out would be a very important part of one's due diligence homework. It would surely indicate whether to expect them to act as instant leverage on the gold spot price, or not. If they do it too much, they add risk due to them not being as good a trader as someone else, and I've seen plenty of that hubris in other markets.

[dereksatkinson]

I think miners do and don't use options to hedge, according to management philosophy. In fact, if trading their stocks, finding that out would be a very important part of one's due diligence homework. It would surely indicate whether to expect them to act as instant leverage on the gold spot price, or not. If they do it too much, they add risk due to them not being as good a trader as someone else, and I've seen plenty of that hubris in other markets.

View it from an insurance perspective. They buy insurance in case they are wrong.

[DCFusor]

Oh, that's how I view what little options trading I do - if I'm buying puts on stuff I own, I have no problem if they expire worthless - insurance - I'm glad my house didn't burn down for the insurance to pay off. I don't mind a reasonable insurance premium in that case to get my best risk-adjusted reward.

But that's not all they do to "hedge" and sometimes they lose considerable money over being un-hedged, which there are a lot of ways to do. Some of the airlines successes and failures in hedging fuel prices come to mind there, pretty spectacular in some cases - either way. There's big chance if they go too whole hog, they wind up like GE - which became a hedge fund with a light bulb factory attached to an outhouse on the back and lost its way.

[swissaustrian]

I don't know that anything predictable ruins options markets, there's no requirement to roll them at any given instant, right? Not to make a pun, but I thought you had the option...

No requirements to my knowledge.
I don´t use COMEX options, though.
I buy over the counter (OTC) options directly from my bank. It´s cheaper and I can individualize the contract.

[DCFusor]

I don't guess my dinky local bank has "the stuff" to do that - if they did, I'd probably take them to the cleaners on it. As is, I make fair money trading their stock, since it seems only me and about 50 tellers and managers trade it, and they seem to be pretty clueless at it. Makes for a great swing trade, and it's like poker in that I know the other players and their "tells". PM me if you want their ticker - no point ruining this nice little game.

[swissaustrian]

I don't guess my dinky local bank has "the stuff" to do that - if they did, I'd probably take them to the cleaners on it. As is, I make fair money trading their stock, since it seems only me and about 50 tellers and managers trade it, and they seem to be pretty clueless at it. Makes for a great swing trade, and it's like poker in that I know the other players and their "tells". PM me if you want their ticker - no point ruining this nice little game.

Hehe. Thanks. No I´ll leave you to that opportunity. I do the same thing with some small Swiss companies over here

[swissaustrian]

Options expiry is coming up on 12-27: http://www.cmegroup.com/trading/meta...ns.html#prodTy
Price at ~ 1600 seems to be the target.

[swissaustrian]

No opex manipulation this month, interesting...
Might have to do with the relatively small open interest.

[dereksatkinson]

No opex manipulation this month, interesting...
Might have to do with the relatively small open interest.

I'm guessing they just ripped the faces off some people who were short at that trendline..

[DCFusor]

I'm right now feeling dumb I didn't trust my system more when it started to flash "buy" a few days ago (the rationalization is it wasn't a strong signal and did reverse once). Missed that nice big one day runup, and now...maybe more risky to enter.

[swissaustrian]

I'm right now feeling dumb I didn't trust my system more when it started to flash "buy" a few days ago (the rationalization is it wasn't a strong signal and did reverse once). Missed that nice big one day runup, and now...maybe more risky to enter.

I think without the FED announcement, we would have seen a different outcome.
Right now pms seem to be close to overbought: http://stockcharts.com/h-sc/ui?s=$GOLD