Swiss Franc Futures Volatility Forecast (06/09/2011)

Swiss Franc futures opened at 122.5 on Monday, plunged to 121.9 on Tuesday, rose to 124.1 on Wednesday, achieved 125.8 on Thursday and closed at 126.7 on Friday.

The actual volatility is around 1.3% (20.6% in annual terms) and the TGARCH plot is manifestly showing an upward sloping curve which seems to suggest that the buying pressure has not calmed down yet and therefore likely to continue over the next trading days. The conditional variance is still trading in a very high range and an ulterior increase in could potentially push the curve towards the 1.8% threshold (28.5% annualised) which have been touched a few weeks ago.

Many investors are still buying the Swiss Franc in order to diversify their portfolios and limit their risk. The volatility,during market turmoils, tend to move symmetrically to prices and consequently an ulterior burst in the conditional variance should be interpreted as a long signal.

The HyperVolatility team is bullish Swiss Franc futures because the buying pressure should augment over the next hours and possibly bring the price action towards the 130 – 131 level again.

However, the Swiss Bank is trying to depreciate its currency once again by selling Swiss Francs in the secondary market and extra care should be taken when trading this market.

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