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DJ EuroStoxx50 Futures Volatility Forecast (18/04/2011)

The chart displays a volatility curve which significantly surpassed the 0.85% (13.4% annualised) figure at which we said we would enter our short positions and effectively our forecast proved profitable once again because the retracement we were expecting manifested itself and we managed to capture it. A great trade indeed!!!

The actual volatility is around 1.1% (17.4% in annual terms) and although the TGARCH curve is now downward sloping we believe that the down move is not over yet.

Specifically, the volatility curve has been flat for almost 3 consecutive weeks and that is why is quite probable that more fluctuations are going to hit the market over the next trading days.

Furthermore, the drop in volatility which is displayed on the right hand side of the chart occurred way too quickly if we consider that the last Monday the Index opened at 2,895 dropped to 2,861 and closed at 2,848.

Also, the diminishing market fluctuations that are shown in the very last part of the chart are mainly due to a sideways movement of futures prices which traded around 2,850 and 2,848 before the end of the week rather than to a strong recovery.

The HyperVolatility team remains bearish on DJ EuroStoxx50 futures and we will place some short as soon as possible because the European Index should drop in the 2,730 area by the next Friday.

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