Using Volatility-Based Cones to Identify Market Opportunities

Futures contracts are used to limit risk exposure by removing the uncertainty about future price. Volatility-based cones are computational algorithms that apply a probability distribution for each variable to extrapolate beyond the known data points and present a potential range of outcomes. The resulting charts illustrate statistical measurements for how widely projected prices are dispersed from the average (mean) price over a given time series (e.g., Calendar or Seasonal Strips).

By identifying opportunities at which fundamental and technical indicators signal pricing inefficiencies, buyers can lock in pricing to protect/hedge against price volatility.