Swiss Franc Futures Volatility Forecast (27/09/2011)

Swiss Franc futures opened at 112.8 on Monday and remained stable at this level on Tuesday but on Wednesday the price hit 111.4 whilst it plummeted to 110.4 on Thursday and settled at 110.7 on Friday.

The actual volatility is 1% (15.8% in annual terms) and the TGARCH curve is still showing a persistent lateral movement which is probably going to last in the upcoming days because the heavy intervention of the Swiss Central bank  scared away many investors who were,instead, seeking protection.

Swiss Franc futures is now an almost dead market. The intervention of the Swiss monetary authorities poised the price action and the massive drop in volatility is simply the natural consequence of the aforementioned equilibrium distortion.

The HyperVolatility team is slightly bullish Swiss Franc futures because the low volatility environment should support the price action which could potentially retest the 112 -113 threshold by Friday. However, any large move on the upside will be heavily arbitraged away from the Swiss Bank giving a great arbitrage opportunity to traders who will look to short Swiss Franc futures should they move too further away.

Overall, the week should see a large lateral movement of the price action with very short term movements,potentially  on the upside, that are not going to distort the price action that much.

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