It’s Tough to Want to Trade Ahead of the Fed

Tom Gentile

Posted in Current Events

By: Tom Gentile on June 14th, 2022 • 2 mins read

When one gets in to options trading and even for those that have traded options for any length of time, it is tough sometimes to sit on ones hands and NOT trade.

But, as the more seasoned options traders know, there are times where NOT trading is the best choice.

The markets are bearish, and the Fed is now expected to raise interest three quarters of a basis point or 0.75%.

Trading the Fed announcement comes with price volatility risk in that we can get a reported number but then the Fed Chair can speak about forward looking projections, concerns on the horizon and make statements based on the data they see.

Then there is the assessment of whether the Fed Chair’s commentary is dovish or hawkish… meaning are they going to be mildly aggressive if at all or mor aggressive in future rate hike decisions.

That could cause the markets to pop and drop multiple times in the last couple of hours of trade on announcement day.

It could then propel markets higher or lower in the coming days to weeks.

Course of Action Ahead of the Fed

The thing to consider is evaluating where your current open positions are and between you and your broker decide if the profit, if any, is best to be taken. Are the losses best to be managed and the trade needs to be closed in advance of more volatility likely to come. Or are you positioned where you want, and you are ok risking things despite what the Fed says.

As for new options trades we like to stand down the day or two before, let the announcement and commentary unfold and then re assess where opportunity lies from there.

App: Toms Option Tools

Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.

Other times I will have other charts may work to amplify my educational points. 

Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.

Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.