IMPLIED volatility in Hang Seng Index options fell to its lowest level since the last quarter in 1994, at 26.5 per cent in the front month, yesterday. Option volume was weak at 1,976 lots. Jardine Fleming said short-term hedgers were buying April 8,200-8,600 risk reversals. Medium-term bulls sold May 9,000-9,400 two by one call spreads. A risk reversal, according to the Swiss Bank Corporation Dictionary of Financial Risk Management, is where an investor buys a put, which provides downside protection, and pays for the put with the sale of a call, which caps upside return. 'The contracts in combination provide a pay-off pattern in an equity instrument similar to the interest rate collar or range forward contract in fixed income and currency markets respectively,' the dictionary said. April futures closed down 75 points at 8,440, a discount to the cash of 29 points, on thin turnover of 9,945 contracts. There was no trading in May. Open interest for Friday was 34,930 contracts. Most of the activity in share futures was retail linked. There were 58 contracts in HSBC, down 20 cents to $88.25 in April, and there were six contracts traded in Hongkong Telecom, up seven cents to $14.90 in April.