Harvesting IV on FOMC with OTM 0DTE SPX Straddles

Hey all, I’m going to go over a pretty simple play that i’ve been running on FOMC days. It’s not often that free lunch is found in the market, but with the volatility and uncertainty that a bear market brings, for now this seems to be one of those rarities.

Three FOMC’s ago, I was watching the SPX options chain and noticed that IV was increasing so rapidly AND consistently on OTM SPX calls and puts, that theta was completely null. At open, IV was at about 50%, and increased all the way to 90-95% before rapidly dimishing going into the rate decision. That kind of IV increase on SPX contracts in 4 hours is insane.

The next FOMC I decided to play it very small, I bought one put and one call each for .10

By 1:00, the call was worth .25 and the put was worth .20

I ran this play again last time in January, buying different strikes ranging from 1.00, .50, .25, .10, and the results were the same. All of them increased, the 1.00 going to 1.50-1.70 for 50% profit, and the .10 going to .20-.25 for 100% profit.

I wanted to make sure this wasn’t a one off before sharing it. Considering everything that’s going on with the banks and the uncertainty of this rate hike, I’m expecting the same results.

The play:

As described, immediately at open buy far OTM 0DTE SPX straddles. I personally just have the option chain loaded at open and ready to go. As I described above, i’ll be targeting puts and calls valued at 1.00, .50, .25, and .10

So for example:

4200C and 3800P for 1.00 each
4250C / 3750P for .50 each
4300 / 3700P for .25 each

These values are completely hypothetical, as you won’t know which strikes are going to be 1.00, .50, etc at open.

Then after quickly loading your contracts, do nothing for 3 1/2 - 4 hours and let IV work it’s magic. I have gotten antsy and sold some contracts 2 hours in as they were up 25-30%, but they really did peak at around 4 hours in. It’s important to sell about an hour before the FOMC report drops. IV seemed to peak around 1pm, and then drop off a bit leading into the report.

The real gem of this play is that you can make a bunch of money on FOMC day without actually having to play the real volatility of the report drop. Also, the reason I am buying far OTM contracts is firstly IV is going to increase much more on them, and secondly by having a low delta value, it doesn’t matter what the SPX intraday price action is.

The reason I choose equal calls and puts is that there is no way to know which way volatility will skew. Both will go up, but usually one side is favored.

Also the great thing about this play is the cost to entry is extremely low!

Hope this play prints for the 4th time, I am highly confident in it. As said above with the uncertainty in the markets right now, this is probably one of the most important FOMC days yet.

Let me know if you have any questions!


Did you grab any yet?

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Hey, no not yet i’m waiting until tomorrow for FOMC.

The contracts have to be purchased right at open so you can take advantage of the most IV gain.

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holy moly I mixed up the days… LOL… See ya tomorrow! But when you say right at open we’re talking like within the first minute? (before 9:31am EST?)


All good haha, and yes I have the option chain loaded with all SPX strikes up so I can quickly place all my orders.

First find the put trading for 1.00, the find the correponding call trading for 1.00. Then the call for .50, put for .50, put for .10, call for .10 etc until you have everything you want. There will be a lot of contracts trading for .10, obviously pick the one that is closest to what SPX is trading at.

Normally in a straddle you’d be aiming for delta neutral but that doesn’t really matter because these are so far OTM, delta is negligible.

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this seems like a great find! Question, are you finding 1.00, .50, and .10 just for easy math or because its so far OTM that theta and/or delta doesn’t matter? Was just thinking cause I think when I normally look at spx contracts either .3 or .4 delta (can’t remember) they are around $10.00 so these must be very far out. Just wondering if it’d be similar to have less contract fees and buy more expensive less otm contracts or thats where theta comes in.

Also, have you looked at buying right before close today or no in case of a gap up or down?


That’s right, I buy super far OTM with low delta so that the price action of SPX isn’t really affecting the value of the contracts.

Theta would normally be the main factor destroying the value of the contracts, but theta is completely overpowered by the rapid increase of IV.

And I expect 0DTE to open at 45-50% IV, and climb to 85-90% by 1pm. This is what happened the last two times.

Didn’t buy anything before close, I buy everything immediately at open!

As far as why I choose the contracts at 1.00, .5, .25, .10, it’s just what has worked the last two times.

I’ll post which strikes I actually end up buying tomorrow!

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This is actually a good strategy. Technically there are some earnings that can be played the same, especially if they have high visibility like META or TSLA or GME. As IV builds on an options chain, the premium increases via the Vega Greek. Heading into a major event you can usually make a few bucks on that alone.

FOMC is one dependable way. You can do the same with CPI positions taken around noon and closed by market close. If you don’t want to play strangles, wait until 10/1030 when a trend establishes itself and take a single leg in the movement of the market. With that you can benefit from Vega and Delta.

As market narratives shift this is a strategy that’s portable to other catalysts as well. If we become focused on job creation if we enter a recession, for example, you can do the same with jobless numbers the day before they’re published.

Play what the market gives you. I love to see it :pepecelebrate:


ok I’m in… a little janky with the strikes… but I’m in


In as well, ended up getting:

4110C / 3890P
4120C / 3875P
4170C / 3815P

IV currently sitting at about 60%, if it climbs to 85-90% like the last two FOMC’s we should be in good shape!


In as well with your first strikes 4110C / 3890P so glad I didn’t fuck that up. Put I think I got for 1.10 though so that sucks. Will reevaluate around 12 and hopefully hold till 1 like you suggested

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I’ll give it a try too, sounds fun


Wanted to give a quick update: currently the total position is down about 20%

IV is definitely increasing much slower than the previous FOMC’s, SPX is currently sitting at 66% IV, only a 7% increase from open.

I’m still planning on holding till 1pm just to see what happens, as i said in previous FOMC’s IV reached 90%, but i am doubting we will see that today.

What’s interesting is that if the position had been purchased 30 minutes after open this time, it would be up about 15%, instead of down 20%.

My guess is that the large drop in vix in the first 30 minutes crushed the value of the contracts by about 35%, and that 6% increase in IV has brought some of the value back.


Position down 10% now… IV currenty at 71%.

The move was definitely buying 30 minutes after open. Still planning on holding for 90 more minutes.


Last update before I sell in an hour, officially at BE minus a few dollars for fees.

Considering the contracts were down 35% two hours ago, this could’ve been a 50% profit play thus far.

I still like this play a lot and it’s been cool watching IV climb from 59% - 76% in 2 hours. Going forward patience will definitely be key here, and waiting for IV to actually start climbing instead of just rush buying at open.

IV stagnated at 59% for an entire hour before moving.


i’m up about 10% now. Interesting the calls still have a good bit less IV than the puts


Forsure, i talked about that in the original post. No way to know whic hway vol will end up skewing, it’s clearly skewing put favored though. Glad to hear you’re up!

Just hit 5% profit now as well. IV picking up quickly, at 79% now.

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Did i do it right? Used SPY instead of SPX.

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Yeah that’s the right idea! Not sure which SPY contracts would move best, on SPX the $100 contracts have definitely been the best.


currently up 37%, I tested this out with a $20 budget, will close in next 15 minutes!