As the markets continue to experience volatility, investors are looking for ways to navigate these unpredictable waters. In this blog post, we’ll explore why gold gamma is a better bid right now, based on recent performance and market trends.

To start, let’s define what gold gamma is. Gamma is a measure of the sensitivity of an option’s price to changes in the underlying asset’s price. In other words, it shows how much an option’s value will change when the price of the underlying asset moves. So, if an option has high gamma, it means that small movements in the underlying asset can result in significant changes in the option’s value.

Now, let’s look at some recent performance data. Spot outperformance is once again a key driver of gold gamma, with risk reversals performing well in the front month. This correlation between spot and volatility is particularly negative, indicating that there may be significant opportunities for profit in the gold market.

Furthermore, the desk favors owning front-end risk reversals due to their strong performance and favorable odds. Outright gamma longs are also a popular choice among traders, as they offer a more straightforward way to benefit from price movements in the underlying asset.

But why is gold gamma particularly attractive right now? One reason is that breakeven for a Monday option (with the market closed tomorrow) is only 2.25% – 4% for silver. This means that even a small movement in the price of silver can result in significant profits, making it an attractive play for traders.

Another reason is that gold gamma looks cheap compared to other assets. While other markets may be experiencing higher volatility and more extreme price movements, gold has been relatively stable in recent months. This stability can make it a more appealing option for traders looking to capitalize on market volatility without taking on excessive risk.