Gold Options Activity Point to Continuing RallyNot a single macro portfolio manager was fired for adding gold to their portfolio over the last two years. Such has been gold’s stunning performance. Will Gold’s ascent continue?
Narratives and numbers signal unstoppable and solid bull run in gold for now.
BULL CASE REMAINS INTACT AND IS INTENFISYING
This paper will not delve much into fundamentals. We have covered it previously in Gold to Shine Bright on Fundamentals, Seasonality & Sentiments . In that we highlighted the three main forces at play: (a) Continued central bank purchases, (b) Rising consumer demand in China & India, and (c) Trump administration’s fiscal policies favouring gold.
In addition to the above, US Dollar weaponization, De-dollarisation fears, and Tariff tensions, serve as additional tailwinds. TradingView Wizard, Konhow , has comprehensively covered the historical impact of tariffs on Gold in his recent paper and video .
SENTIMENTS HAVE SURRENDERED IN FAVOR OF RISING GOLD
This research note will not dive into the weeds of technical analysis either. TradingView’s Technical Analysis dashboard summarises it all elegantly.
TradingView
Momentum is in favour. Oscillators are neutral indicating little risk of price reversal. Overall, sentiment remains bullish gold.
Gold prices as represented by CME Micro Gold Futures front month contract formed a golden cross on 10th January 2025. Since then, prices are up 8.5% as of 13th February 2025. Current prices are well above its 50-day, 100-day, and 200-day DMAs.
RSI is in overbought zone. Expect some pull back in gold prices from time to time on profit taking. But the upward trend is undeniable. The MACD shows that Gold momentum continues to be on the rise but with waning bullishness.
Readers can access the entire library of technical ideas focussing on Gold on TradingView’s Gold Ideas Page ideas page .
OPTIONS MARKETS ARE SIGNALLING A SOLID BULL RUN AHEAD
This paper aims to unpack recent activity in CME gold options market and its impact on prices. No contrary signals there either. Options market also signal bullish gold.
QuikStrike is a free-to-use tool for registered participants on the CME Group website. The tool provides a vast range of analytics to guide portfolio managers & traders to better comprehend the underlying market. Each report comes with a helpful user-guide to describe the data covered within the report.
Some key takeaways below:
Open Interest Profile page shows that as of close of markets on 11th February 2025, total call open interest (“OI” for short) stood at 634,815 lots across all expiries and strikes. Aggregate put IO totalled up to 357,305 lots resulting in a put-call ratio (p/c ratio) of 0.56.
Calls are options contract that represent a bullish view. While puts are contracts representing bearish outlook. At 0.56 p/c ratio, there are twice as many bullish positions for each bearish one.
Source: CME QuikStrike
Most Active Strikes allow portfolio managers and traders to analyse top strikes with shifts in open interest. Table below shows top 10 strikes registering the largest change in open interest between 4th February and 11th February.
Starting first with the Calls (left section of the table below), participants have been building up open interest in strikes 4000, 3200, 3250, 4500, 4032, and 3,975.
Call options have also booked reduction in open interest at strikes 3000, 3075, 3100 and 3025. On a net-basis, open interest is up 10,312 lots across these top ten strikes over various expiries this year.
Source: CME QuikStrike
Puts (right section of the table above) shows rising build up in open interest for strikes ranging from 2740 to 2880.
Collectively, this indicates that market participants are rooting for gold prices to rise through USD 3,000/oz and to even rally past USD 4,500/oz. Will that happen? Only time will tell.
Given that risk managers are establishing puts at such high levels point to strong support for gold prices at current levels.
In a nutshell, current prices are not only formidably comfortable but the potential to rise is also highly probable.
Shifting the attention to volatility, the CME Group also offers CVol which is another free-to-use tool. Portfolio managers and traders can visualise implied volatility behaviour on this tool.
Source: CME CVol
The GCVL which is the Gold CVol index shows implied volatility at 17.65 and with a positive skew of 1.08. Implied volatility easing even at an elevated prices indicates that market participants are comfortable at current price levels and do not foresee immediate large price moves.
Skew on the CVol tool is defined as Up Var minus Down Var. Up Var is the likelihood of the price rising while Down Var measures the likelihood of prices falling. A positive skew shows that the market is pricing a higher likelihood of rising prices relative to a down move.
FUND FLOWS INTO GOLD ETF IS UP 47% YOY
Among its rich set of features, TradingView also shows daily ETF fund flows . GLD is the prominent ETF commanding assets under management (AUM) of USD 80.65 billion.
This time last year, GLD ETF showed AUM of USD 54.77 billion. Fund inflows have spiked 47.25% over the past 12 months.
HYPOTHETICAL TRADE SETUP
With fundamentals, sentiment, options market, and fund flows all pointing to a price that is set to rise, this paper posits a long position using CME Micro Gold Futures expiring on 28th April 2025 (MGCJ2025) based on the following entry, exit levels and the reward-to-risk ratio:
• Entry: USD 2,900/oz
• Target: USD 3,100/oz
• Stop: USD 2,800/oz
• P&L at Target (USD per lot): +2,000 ((3,100 – 2,900) x 10)
• P&L at Stop (USD per lot): -1,000 ((2,800 – 2,900) x 10)
• Reward-to-Risk Ratio: 2x
Please note that Each Micro Gold Futures contract provides an exposure to 10 troy ounces.
Both standard-sized gold futures (GC) and the newly launched 1-ounce gold futures offer avenues to express bullish sentiment on the yellow metal. This comprehensive suite of gold futures is tailored to enhance flexibility and precision, empowering investors to capitalize on market opportunities effectively.
CME Group lists a raft of products covering a range of asset classes more accessible while also enabling granular hedging for portfolio managers.
Portfolio managers can learn more on how to access these micro products by visiting CME Micro Products page on CME portal to discover micro-sized contracts to gain macro exposures.
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MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme .
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