British Pound Futures Volatility Forecast (24/04/2011)

The HyperVolatility team was right once again. British Pound futures moved higher as expected and hit the 164 – 165 as we correctly forecasted one week ago. Futures prices traded around 162.4 on Monday rose to 163.9 on Wednesday and closed even higher at 165.08 the last Thursday.

The current volatility is 0.48% (7.6% annualised) and the TGARCH curve is visibly collapsing towards the equilibrium point which is around the 0.38% – 0.4% area (6% – 6.3% in annual terms) implying a potential and ulterior rise of British Pound futures over the next trading days.

On the other hand, the 165 level is the highest price achieved by futures in the last 5 months and therefore an increase in the conditional variance seems to be a quite likely scenario too because the TGARCH curve is extremely close to its equilibrium point.

The HyperVolatility team remains moderately bullish on British Pound futures because we believe that a short term drop of the variance will push prices in the 165. 9 – 166 area but, at this point, we would probably close out our positions and bank in our profits.

Nevertheless, should the volatility surpass the 0.52% threshold (8.2% annualised) we will look for short opportunities.

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