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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: philv who wrote (29460)	7/29/2009 2:18:51 PM
From: sea_urchin	Read Replies (1) \| Respond to of 81504

Phil > who knows what may yet come? My own observations have taught me that a sustained movement is unlikely unless the volatility is right down. The reason is the cost of call (or put) options depends on market volatility. 25yearsofprogramming.com >>The Black-Scholes formula requires as one of its inputs the stock's volatility, the "annualized standard deviation of the underlying stock price's daily logarithmic returns".<< The index of volatility I use is the distance between the Bollinger Bands which is usually twice the standard deviation of the price distribution. Plus/minus one standard deviation gives a statistical probability that 95% of the distribution will be contained, plus/minus two standard deviations gives a probability that 99% of the distribution will be contained. Re Oil/LPG, I imagine the present price range would suit most consumers and producers. I also believe the wild price fluctuations are the result of market speculators and not supply/demand imbalances.

To: philv who wrote (29460)	7/29/2009 4:49:41 PM
From: sea_urchin	Read Replies (1) \| Respond to of 81504

Phil, talking about volatility, Bollinger Bands and probability, let me bring up a chart of our old friend -- the gold/oil ratio. I argue that only when the Bollinger Bands get close together, as they were, will the speculation be out of the market. Only then will we be able to decide what the "normal" prices are. As you can see on the chart, the Bollinger Bands are starting to get closer but they still have a long way to go to get anywhere near previous separation distances. BTW, these Bollinger Bands are +/- 2 standard deviations from the mean (200 day moving average). This means that there is a 99% statistical probability that the distribution of all values will lie be between them. In other words, the Bollinger Bands "shape" the chart. Values which fall outside the Bands are unsustainable.