Daily Options Report

So do options sites have a daily topic consultation and then agree on what we'll post on each day?

The answer is no, though many times I'll buzz around and see we did in fact pick the same subject. I'm guessing we read similiar sites, and follow the same people on twitter, and go on the same tangents.

Anyway, today's one of those days as Condor Options notes the spike in Gold volatility as does VIX and More.

While there is no disputing that gold prices are high (today they also matched their 52 week high), the comments I have seen about elevated volatility in gold are not supported by the numbers. In fact, the CBOE’s gold volatility index (GVZ), which is sometimes known as the “Gold VIX,” closed today at 26.97, which is in just the 20^th percentile of the GVZ’s range since the index was launched in June 2008. This means that the implied volatility in the gold ETF (GLD) is not pricing a large move in the commodity in the coming months.

Looking back at historical volatility, the numbers show volatility at historically low levels. A week ago today, for instance, GLD set a new record low for 20-day historical volatility. While historical volatility has risen slightly in the last week, it is still only in the 6^th percentile for HV data going back to June 2008.

A related, but little discussed phenomenon is the correlation between gold and gold volatility. I track this in several different ways, including using 10-day and 20-day rolling correlations between GLD and GVZ. In each of the last three days, the 10-day and 20-day rolling correlations have set new records, indicating that GLD and GVZ have been moving upward almost in lockstep lately, particularly for the past five trading sessions.

The correlation data do have some interesting historical precedents associated with them. For instance, the last time the 10-day rolling correlations set a new high was at the beginning of June, just as gold was topping out just below 990.

Even though it's not high by the standards of the past year, volatility here is not high, at least it's made a decent move off the lows. And it's thanks to actual moves in the underlyings. The next question then is whether this is some sort of leading indicator for broader market volatility? Time will tell.