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Swiss Franc Futures Volatility Forecast (27/03/2011)

The last week we announced we would not immediately enter our long positions because a sideways movement was likely to happen during the first trading days. Effectively, the market traded around 110.6 and 110.7 for almost 2 days before dropping to 108.7 on Friday even if such a sharp plummet has not been accompanied by a large rise in volatility.

The TGARCH curve is extremely flat and the chart displays a very stable situation since the conditional variance has clearly touched its equilibrium point at 0.61% (9.6% annualised) and given the large drop in price occurred on Friday this is quite suspicious.

The fact that the volatility did not augment during the last plunge means that many investors did not get rid of their long positions as they believe that the fall is only temporary.

The volatility will remain almost stable, even if a short term explosion could push Swiss Franc futures towards the 108 area, but the final outcome should be a recovery of the price in the 110 zone.

The staff of HyperVolatility will monitor quite accurately this market even if we remain bullish on Swiss Franc futures and we will try to place some long as soon a good opportunity will arise.

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