Swiss Franc Futures Volatility Forecast (10/04/2011)

The last week we were bullish on Swiss Franc futures and effectively our analysis proved quite accurate and profitable. Specifically, futures prices opened at 108.3 achieved 109.1 on Thursday and rallied to 110.1 on Friday whilst the volatility plot remained practically unchanged.

The actual volatility is around 0.6% (9.5% annualised) and it is right at the bottom of the equilibrium level which has been violated by the TGARCH curve very rarely. Therefore, some small fluctuations are going to be expected over the next trading days although the 0.7% – 0.72% area (11.1% – 11.4% annualised) should not be surpassed.

The Swiss Franc is going to appreciate against US dollar even further and even if we reckon that a market retracement is on its way we remain bullish on this market because the stability of the volatility highlights the fact that many investors did not get rid of their long positions and are still using the Swiss currency as a mean for earning extra returns since many equity Indices are not performing particularly well.

The HyperVolatility team will place some longs because we believe that the market is going to test the 110.5 – 111 area by the end of the week. However, this is an area which has never been touched over the last year and that is why a great deal of attention will be needed in order to secure a profit.

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