E-Mini Crude Oil Futures Volatility Forecast (18/04/2011)

The last week we were moderately bullish on this market even if we were expecting a short term retracement which could have dragged E-Mini Crude Oil futures down and clearly our analysis was right once again.

The market opened at 109 dropped to 106.5 and then rose again to 109.4 the last Friday whilst the volatility touched 2.4% (38% annualised) and then dropped significantly to 1.8% (28.5% in annual terms) although the curve seems not to have reached the bottom yet.

On the other hand, the US dollar keeps depreciating against the Euro and such a factor is probably going to maintain oil prices in the current area and if we consider that the situation in Libya is still uncertain the bullish view seems to be the most likely scenario.

The TGARCH curve will tend to mean revert in the 1.6% area (25.3% annualised) and this should keep E-Mini Crude Oil futures in the current zone although the conditional variance will tend to augment and provoke a short term retracement.

The HyperVolatility team remains moderately bullish on this market and we will place some longs as soon as a good opportunity will arise. There might be a bit of a down movement this week but futures prices should get back in the $ 110 area by the end of the week.

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