Looming COMEX Gold Option Expiration

It's that time of the month again where options on COMEX gold and silver will price and settle. This typically brings all sorts of price manipulation shenanigans, and this week promises to be no different.

Actually, the fun began last week with the monthly NYSE option expirations on Friday, March 21. All sorts of listed options on ETFs and mining shares expired at the NYSE close that day, and after strong price rallies earlier in the month, shenanigans were expected for NYSE option expiration too. We didn't have to wait long. As soon as the NYSE opened at 8:30 CT, down went COMEX gold.

Gold - 5-minute candlestick chart

Impact of NYSE Expiration on Mining Shares and ETFs

The ripple effect moved many mining share and ETF calls out of the money, and by the close, they were worthless. Nowhere was this more evident than in the trading of the big silver ETF, the SLV.

I had tried to warn TFMR site members and all of my X followers that these antics were pending, but what else could we do? In the end, we were powerless to stop them.

SLV Price Manipulation and Options

By the time Friday began, there were 84,130 open call options at the $30 strike price AND there were also 40,310 open puts, with price beginning the day at $30.50. If any of these options were to settle "in the money", they would pay out in cash to the option holder later in the day. Instead, the price of SLV closes RIGHT AT $30.00—thus making all 124,440 options worthless.

And that's just one example. How many countless thousands of options on the other ETFs and mining shares were rigged out of the money by the time the NYSE closed on Friday?

COMEX April Gold Contract and Upcoming Expiration

Now our attention turns to the monthly COMEX option expiration, which is scheduled for the COMEX close on Wednesday, the 26th. COMEX option expiration day almost always brings price manipulation attempts as the option writers attempt to maneuver price into a spot that minimizes their potential loss exposure.

The current contract of interest is the Apr25 COMEX gold. This contract has served as the front month for the past 60 days and has seen considerable trading volume in its options too. As I type this on Monday, the 24th, the current price of the Apr25 gold is down to $3014 after peaking at $3065 back on Thursday, the 20th. Could this "correction" be related to the pending option expiration for Wednesday?

Below is the open interest table for Apr25 COMEX gold options. First, note that by dropping price from $3060 back to under-$3015, there have been 9,117 call options that have been moved "out of the money".

Now, of course, it must be noted that moving price down places some put options into the money. But if we sum up, that total is just 3,213. As such, the potential savings of a lower price is 3X greater than the potential cost of a higher price.

April Delivery Games and End-of-quarter Pressure

And now look closely at the $3000 strike price. Yes, there are 3,589 open puts at that level, but there are also 6,635 open calls! Does this not strike you (no pun intended) as nearly the same situation as the SLV last Friday? Would you be at all surprised if the Apr25 COMEX gold contract finishes the Wednesday COMEX session at over very-near-$3000? I wouldn't!

Lastly, the Banker fun-and-games don't end on Wednesday, so be vigilant. Next up on the calendar is the "expiration" of the Apr25 contract as it goes off the board and into "delivery" at the COMEX close on Friday, the 28th. After a new all-time high record of 76,567 "deliveries" for the prior front month Feb25 contract, do you think that some chicanery is possible in order to dissuade long holders from taking "delivery" in April? Hmmmm.

And then next Monday, the 31st, brings the end of the month and end of the quarter. The painting of these long-term charts will no doubt bring attempts to influence price. Additionally, untold thousands of OTC LBMA options will price off of the final PM Fix of the month at 10:00 a.m. ET. Should we expect that day to bring another sharp price drop that begins at the COMEX open and concludes at the PM Fix? Of course! Here's a reminder of how gold behaved on the final trading day of February—Friday, the 28th:

Gold - 5-minute candlestick chart

April to June is historically a strong seasonal period for gold, and I expect higher prices through the quarter. However, we must first endure the usual end-of-quarter and option-related shenanigans. My hope is that this post prepares you for a volatile week ahead.

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