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German Bund Futures Volatility Forecast (23/01/2011)

The last week we suggested going short in order to take advantage of the downtrend despite the volatility was going down. Particularly, we forecasted a segmented movement: bullish at the beginning but bearish at the end of the week and so it was. Furthermore, the expected volatility drop towards the 0.35% (5.5% annualised) is now evident in the volatility chart.

The actual volatility is 0.34% (5.3% annualised) and this figure is extremely close to the lowest level ever touched by the TGARCH curve over the last 5 months. Consequently, we are expecting more volatility to happen in the market which would accompany the price in the 122.5-123 area.

On the other hand, the news coming from the US the next Thursday could eventually drive Bund futures upward should they not be as good as expected.

The staff of HyperVolatility is still bearish on this market because the volatility should get back to the 0.38% – 0.4% zone (6% – 6.3% annualised) driving the price down again. Nevertheless, great caution is needed on Thursday.

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