Gold – Deep out-of-the-money calls see big jump in Open Interest

Gold rally from the low of $1204 (July 10 low) appears to have come to a halt at $1244.54 (July 18 high) as prices have deflated to $1237 levels today. Prices did dip to a low of $1235.81 yesterday, before ending the day at $1240.85. 

The options data published by the CME show the open interest in the OTM calls jumped by 744 contracts. At first glance, one may consider it as a sign of investors betting on a continuation of the rally in gold. However, the details reveal the max additions are in the deep out-of-the-money - $1300 call option, indicating call writing (selling). 

Meanwhile, the OTM Put - $1220 shows an addition of 269 contracts to open interest. Thus, it is safer to conclude that the investors do not expect the rally from the low of $1204 to continue and are actually positioned for a drop to sub-$1220 levels.