Reuters reports tonight that the CME Group for the first time will allow physical settlement (longs can take physical delivery) for weekly gold options contracts effective July 1st.
Effectively the move allows options holders to exercise into futures contracts and take physical delivery of gold bullion should they so desire.
This is largely a PR move (and an effort to steal volume from various OTC exchanges) but notice that a mechanism for physical SILVER settlement was not included in the change.
CME Group is allowing investors in its short-term gold option contracts to take delivery of physical bullion in a bid to increase the product’s appeal against over-the-counter gold options.
The biggest operator of U.S. futures exchanges said it will amend the contract of its weekly gold options to let investors exercise into futures contracts effective July 1, pending approval from the U.S. Commodity Futures Trading Commission, CME said in a notice late last week.
Prior to the change, the options, which were launched in July last year on CME’s COMEX metals platform, were settled by cash only and physical delivery was not permitted.