Susquehanna states that options investors are betting on rising gold prices

Quantitative trading firm Susquehanna stated that options investors are increasingly paying premiums to participate in further rises in gold prices.

Chris Murphy, co-head of derivatives strategy at Susquehanna, pointed out that as gold prices continue to rise, the one-month implied volatility remains close to recent lows, allowing investors to increase their upside exposure without paying higher volatility costs. At the same time, gold has also seen a reflow of funds.

Murphy mentioned a trade involving the purchase of 8,000 call options on the SPDR Gold Trust with a strike price of $460 and an expiration date in November, priced at approximately $5.55 each. The exchange-traded fund closed at $405.49 on Monday.

Murphy stated that changes in the skew, which measures demand for options at different price levels, are particularly critical.

He noted that the skew for gold has clearly shifted from bearish put options to bullish call options, reversing the situation where put protection was relatively expensive in early summer; this shift has been reflected in recent fund flows. He also mentioned that about 25,000 September $350 put options traded at $0.62, "taking advantage of cheaper downside protection costs."

Susquehanna stated, "The fund flows also support the relevant backdrop, with gold funds recording the strongest inflows since January."

Spot gold rose 0.3% to $4,428.43 per ounce. December-delivery U.S. gold futures rose 0.2% to close at $4,482.40. (da)