Currently trying to figure out the best game plan for dealing with FOMC tomorrow. Although we’ve been playing calls and selling as soon as the 2PM pop, would there be something similar with better potential?
VIX for example.
Last time I had both calls and puts and took 20% on both with how wild SPY swung. Past performance doesn’t guarantee future though of course.
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I think you all are thinking of the minutes, which are released next month. Maybe??
iirc the meetings can be just as volatile.
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Yes, the Meeting days can be just as volatile, if not more so, depending on the information.
Part of minutes are released/presented at the last day of the meeting.
Full Minutes will be released on May 25…
There is the 2pm release of the rate decision, and then the 2.30pm conference when JPow will speak.
Last time, the market sold off between 2pm and 2.30pm just on the rate news alone, but then JPow came to the mic and started saying sweet, soothing things, which slowed the selling and allowed the vanna effects to take over and fuel a rally.
It was a rather humbling experience, so this time, I think I’ll just sit it out until the press conference is over, and the market chooses a direction. If there is a rally, it should last days. If there isn’t a rally, market will more likely move sideways unless they decide to hike by 0.75 or they accelerate QT.
Two other reasons for waiting for a direction:
- Unless we are playing straddles or strangles that we plan to sell before 2pm, the volatility reduction will cause a fair bit of the premium to evaporate. So I’d feel more comfortable entering positions after 2.30pm.
- Market is already somewhat happy and VIX has gone down from 36 to 30. Almost feels like the market is front running the FOMC meeting because everyone else also knows what happened last time. Bit like when the market realized opexes are times for dips, followed by rallies, for a good chunk of 2021.
Am also looking at picking up ZIM and DAC calls if market moves positively, and ARKK and more CVNA puts if it moves negatively to ride the trend. Core to this all is not fighting the trend or trying to predict a pivot without market confirmation.
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We did get employment and trade figures this morning that were below forcast, and energy seems to be coming in hot from the recent developments in europe. I would expect a negative reaction on a normal day, but I still think 50bps will be recieved as some sort of sign of relief, so bullish. So I would agree with Ni, today is a big question mark until we get the press conference afterwards. We also have Biden speaking around the same time. It is worth mentioning the 2yr/10yr SOFR swap rates inverted again this morning after employment numbers came out. So the credit market reacted as expected, not a clue if equities will follow.
Ill be trading normally until getting closer to the announcement, I dont want to go into the announcment or press conference with any heavy positions either way. Im planning on playing a small strangle to scratch the itch, but will be looking at whatever trend starts to form to enter real positions afterwards.
Hope everyone has a great day
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Not sure where to put this or how much help it will be. Ive put together a simple chart of option prices for strike just above open price of spy along with highs and lows of the day. I also have one for just spy prices and my calculated option price but it got to messy with me trying to figure out why it doesn’t always get the 2:01ish bump. This goes back to 2019 which, along with a little into 2020 shows we unfortunately can not always rely on this bump. It would be great if we could figure out why it doesn’t always work. The most recent time is jan of 2022. I looked at VIX prices at open to see if this could be an indicator of what to expect but could not find a relation. Hopefully someone has more insight then me.
FOMC mins release play.xlsx (10.8 KB)
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