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E-Mini Nasdaq Futures Volatility Forecast (24/04/2011)

E-Mini Nasdaq futures on Monday closed at 2,291 whilst the closing price on Saturday the 15th was 2,310: a sharp drop indeed!!! The market then recovered and got back to 2,310 but the ending of the week experienced one of the most violent rallies over the last 5-6 months because E-Mini Nasdaq futures rose to 2,355 on Wednesday and closed at 2,373 on Thursday.

The actual volatility is 0.48% – 0.5% (7.6% – 7.9% annualised) and its value is even lower than the equilibrium point which is set around 0.65% (10.3% in annual terms) implying that the next days will probably see a shy augment of market fluctuations because the curve will try to mean revert.

Specifically, a small increase in the conditional variance could destabilise the price action and there might be a very short term retracement in the first trading day which could drag futures prices back into the 2,365 zone.

However, the retracement should be temporary because once achieved the equilibrium point the volatility should remain almost constant favouring an ulterior recovery of the price.

The HyperVolatility team is bullish on E-Mini Nasdaq futures and we will place some longs as soon as the volatility will settle because the price should achieve the 2,380 – 2,385 area by the end of the next week.

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