DJ EuroStoxx50 Futures Volatility Forecast (02/05/2011)

The last week we were expecting a rise of the Index, our profit target was set to 2,890 points and our analysis proved very profitable once again. In particular, the European Index opened at 2,890 rose to 2,949 but closed at 2,951 on Friday.

The actual volatility is around 0.8% (12.6% annualised) and the curve is now showing a fairly stable scenario which could remain unaltered over the next trading days.

On the other hand, the volatility is extremely low and since the curve is now fluctuating within the mean reverting point a short term explosion of the conditional variance could easily twist the situation and push futures prices down.

The HyperVolatility team is moderately bearish on the DJ EuroStoxx50 because an augment of market fluctuations could bring the price back into the 2,915 – 2,920 area.

We will wait for the volatility to increase and pass the 1% level (15.8% in annual terms) before entering the market but should this scenario not be confirmed by the market we will step aside and monitor the market waiting for the next week.

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