Gold Futures and Options Trading
*The information contained within this webpage comes from sources
believed to be reliable. No guarantees are being made to the
content's accuracy or completeness.
The History of Gold and Gold Futures Market
The Egyptians mined gold before 2,000 B.C. and the first gold coin was minted on
the orders of King Croesus of Lydia in the sixth century B.C. Throughout history
nations have embraced gold
as a store of wealth and a medium of international
exchange and individuals have sought to possess gold as
insurance against the day-to-day inflationary uncertainties of
paper money. Gold futures and gold options are sometimes used as an inflationary
hedge. Gold is often thought of as a default currency in times of economic
upheaval and depreciating currency values.
The United States backed its currency with gold and silver in 1792.
This continued until President Richard Nixon ended the gold standard
leading to dissolution of the Bretton Woods international payment
system. Gold is an inactive substance and is unaffected by air,
moisture and most solvents. Gold is mined on every continent with
the except for Antartica where mining is not allowed. Gold is
typically found in quartz veins or alluvial deposits as a free
metal. Because gold is virtually indestructable most of the gold
every mined is still in existence whether it be unmined or stored
Gold Futures and Options Quick Facts
100 ounce contract
one dollar move equals $100
trades February, April, June, August,
October, December and serials
Gold futures symbol (GC)
Here is the option strategy guide for metals courtesy of the
Pure gold is one of the most malleable and ductile of all metals
which makes gold such a vital industrial commodity. It is an
excellent conductor of electricity, is extremely
resistant to corrosion, and is one of the most
chemically stable of the elements, making it
critically important in electronics and other
A broad cross-section of companies in the gold
industry, from mining companies to fabricators of
finished products, can use the COMEX Division gold
future and gold future option contracts to hedge their price
risk. Furthermore, gold has traditionally had a role
in investment strategies, and gold futures and
gold options can be found in investors' portfolios. Learn
Gold future contracts opened for trading in the United States
on December 31, 1974, timed to coincide with the
lifting of a 41-year ban on the private ownership of
gold by U.S. citizens.
Today, gold future prices float freely in accordance with
supply and demand, responding quickly to political
and economic events.
Gold can be an effective hedge against inflation. In
addition, gold is often inversely correlated to the US
dollar, making it a good currency hedge. As an asset
class, gold has all the advantages of being
universally regarded as a currency, without what are
all too often the disadvantages of being subject to
the economic and monetary policies of one particular
Exchange-Based Gold Futures Trading
The New York Mercantile Exchange (NYMEX) merged with the
Commodity Exchange, Inc. (COMEX) in August 1994 to
become the world's largest physical commodity
futures exchange. Recently the Chicago Mercantile Exchange (CME) merged with
NYMEX and COMEX to become the largest exchange in the world. The gold future contract is one of
the most liquid of the precious metal future
contracts. During the September 11 terrorist attacks
the COMEX was destroyed but within days the gold
futures and gold options markets were trading again.
This is a testament to the strength and viability of
the metals future markets.
Are you a gold
hedger? If so,
click here to learn more.
Gold Options on Futures Contracts Explained
A gold call option gives the purchaser the right
but not the obligation to purchase the underlying futures contract
for a specific time period and a specific price (strike price).
Let's say that you wanted to purchase a June gold $1,000 call option
and pay a premium of $2,200.
This means that you bought the right but not the obligation to buy
100 ounces of June gold for $1,000 per ounce. Of course, very few
options are bought for the purpose of taking delivery but that is
one potential outcome. Chances are that you either bought the gold
option to hedge your price risk in the physical gold market (you may
be a producer and own a gold mine or be a consumer like a jewelry
fabricator) or you are speculating that gold prices will go higher
in an attempt to make a profit.
A gold put option gives the purchaser the right but
not the obligation to sell the underlying futures contract for a
specific time period and a specific price. Let's say that you wanted
to buy a June gold $900 put option and pay a premium of $2,100.
This means that you have the right but not the obligation to sell
100 ounces of June gold at $900 per ounce.
What is the delta factor?
The delta factor of an option represents the estimated percentage of
change an option will receive based on the movements in the
underlying futures contract.
Let's assume the June gold $1,000 call option above has a 30% delta
factor. This means that if the underlying futures contract were to
rally by $1,000, then the call option would accrue by approximately
$300 or 30% of $1,000 in the gold futures contract.
What is theta?
Options are wasting assets which means that they lose value as time
passes. The theta of an option is the measure of time decay.
Let's assume that you bought a June gold $1,000 call option with 60
days left until expiration. Let's also assume that the gold futures
prices have moved very little over the last month and are exactly
the same price 30 days later. Your option will have lost 30 days
worth of time and therefore will be worth less today that it was
when it had 60 days left until expiration.
Vega is a measure of the implied volatility of
an option contract as it relates to its underlying futures contract.
For instance, if the underlying futures contract is extremely
volatile then the implied volatility of the options of that futures
contract will be affected.
In a high implied volatility environment option
premiums tend to expand. Conversely, in a low implied volatility
environment the option premiums tend to decrease.
*Contract information changes from time to time. Please
to see the most recent contract specifications and
for the most recent trading hours.
Futures and Gold Option Contract
100 Troy ounces
U.S. dollars and
cents per troy ounce.
Hours (All times are
New York time)
trading is conducted from 8:20 AM until 1:30 PM.
After-hours electronic trading begins at 2:00 PM on
Mondays through Fridays and concludes at 8:00 AM the
following day, with the exception of Friday's
session which concludes at 4:30 PM that same day. On
Sundays, the session begins at 7:00 PM and concludes
at 8:00 AM the following day. (Verify with exchange)
Gold futures trading is conducted for delivery during the current
calendar month; the next two calendar months; any
February, April, August, and October falling within
a 23-month period; and any June and December falling
within a 60-month period beginning with the current
$0.10 (10¢) per
troy ounce ($10.00 per contract).
Daily Price Fluctuation
limit, based upon the preceding day's settlement
price, is $75.00 per ounce. Two minutes after either
of the two most active months trades at the limit,
trades in all months of gold futures and options will
cease for a 15-minute period.
terminates at the close of business on the third to
last business day of the maturing delivery month.
against the gold futures contract must bear a serial
number and identifying stamp of a refiner approved
and listed by the Exchange. Delivery must be made
from a depository licensed by the Exchange.
delivery day is the first business day of the
delivery month; the last delivery day is the last
business day of the delivery month.
of Futures for Physicals (EFP)
The buyer or
seller may exchange a gold futures position for a
physical position of equal quantity. EFPs may be
used to either initiate or liquidate a gold futures
required for open gold futures positions.
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copper futures and
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Gold Futures Special Report