German Bund Futures Volatility Forecast (04/07/2011)

The last week we forecasted a drop in German Bund futures with high probability for the price action to retest the 125 area and the HyperVolatility team was right once again. We all hope you took full advantage of our quantitative based projections because the market move we just saw was indeed a great trade!!!

German Bund futures opened at 126.8, dropped to 126.1 on Tuesday, settled at 125.8 on Wednesday and remained around this level both on Thursday and Friday because 125.5 and 125.4 have been the last prices prints.

The actual volatility is 0.34% (5.3% annualised) and the TGARCH chart is manifestly showing and extremely flat volatility curve which is unmistakably trading within its equilibrium point. Also, the curve is slightly upward sloping meaning that more volatility should be expected over the next hours but its inclination seems highlighting the occurrence of a gradual increase of market fluctuation rather than a sudden explosion of the conditional variance.

The HyperVolatility team remains bearish German Bund futures because the gradual but constant augment in the conditional variance is probably going to drive the price back down in the 124 – 124.5 area.

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