"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, November 14, 2014

Gold Volatility Index Soaring

If this keeps up, watch for the CME Group to raise margins on gold futures contracts soon. Volatility is sitting at more than a one year high in gold. Option guys take note.


  1. If margins were raised, who would be under more pressure after today's short covering rally? The shorts or longs?

  2. The Gilliom

    there is no obvious answer; Hedge Funds would potentially be more sensitive to Initial Margin than Bullion Banks (who merely factor the financing cost into the Bid / Offer prices they make), but it remains unclear for the time being whether

    a. Hedge Funds who are short & caught are closing out positions (insensitive to changes in InitialmMargin) or

    b. Hedge Funds are opening new Long positions (in which case increased Margin requirements would slightly disadvantage them)

    I currently this recent price movement down as a squeeze rather than a rally, so I favour Option (a), in which case the next down movement - if there is one - may be deferred or attenuated insofar as Hedge Funds will need to open new Short positions

  3. Indeed, indeed. There is lots of premium to sell here now, and with gold in somewhat are a range now, it makes sense to start selling some of that. GDX is too cheap now to sell any good premium worth the risk, but GLD has great premium now, especially in the weeklies, even though you are taking a bit more gamma risk. I personally like selling the .10 deltas 7-10 days out on the put side here on small down moves...


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