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German Bund Futures Volatility Forecast (20/02/2011)

The staff of HyperVolatility forecasted an up move of Bund futures and suggested 122.9 euro as a target price. Indeed, Bund futures rallied to 123.8 and then established in the 123.4 euro area. What a wonderful trade!!!

The current volatility is 0.48% (7.6% annualised) and it seems to have reached the top. In fact, in the previous months, almost all the time that market fluctuations achieved this level they suddenly mean reverted to the equilibrium point which is set to be around 0.33% (5.2% annualised).

The volatility should decrease and the market is probably going to move sideways. The volatility explosion accompanied an up move and therefore should be interpreted as word of warning because the price is likely to sensibly drop and then tend to remain stable in the 122.5 -123 area.

The staff of HyperVolatility will remain probably remain flat this week since a sideways movement is quite likely to happen. However, if better or worse than expected news from US are going to hit the market, Bund futures could drop or rally respectively. In such a case we will try to play intra-day.

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