Gold and oil volatility on the rise again ahead of EU summit

Following the Greek election recently, out of the money volatility was sold as the event risk was removed. During the last week, however, volatility has been picking up again. with traders pricing in the risk of failure at the EU summit on June 28-29.

WTI crude traders are still most concerned about hedging tail end risk, with both OTM put and call volatility rising the most over the past week. The two most traded strikes during the last five days were Put 65 and Call 90 both with August expiry.

Gold volatility has also picked up over the last week, following a collapse of OTM vol the previous week. With gold trading back below dollar 1600 per ounce, holders of long positions have been buying low delta puts to protect themselves against a further price drop. The most popular strikes in terms of contracts traded during the past week have been Dec12 Call 1950 and Aug12 Call 1625.

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