Tomorrow we will have Bernake's first testimony. This afternoon 1D-10Y straddle traded at 39/43 bps (mid 24% BS vol) and 10 year swap rate stood at 5.14%. There are two ways to calculate back the implied market movement on this HH day. 1. Since one year Vol is 24%, then one day vol is 24%/sqrt(252)=1.5119%, thus the break even movment for 10 year swap rate is 1.5119%*5.14%=7.76 bps. 2. For 10M 10 year swap, DV01 is around 8k. And the premium of the straddle is 41k. Thus if the 10 year swap rate moves 41k/8k=5bps from current level 5.14%, it will break even. Obviously 7.76bps are much bigger than 5bps. Could anyone indicate me which way is right? Thanks!

5 bps is the move you need on the day, the 7 bps move is the SD that gives you a distribution with PV of zero. ATM option price = PV01 * 0.4 * SD so straddle = 0.8 *PV01 *SD

What is 10M and 1D?And what is the implied probability of a move greater than 1% today?