Where Options Traders are Prior to the Fed Announcement This Week

Tom Gentile

Posted in
Daily Report

By: Tom Gentile
May 1st, 2023

2 mins read

This Wednesday, we are going to get yet another interest rate hike decision from the Federal Reserve Open Market Committee (FOMC).

The decision will be either no rate hike or it will be another hike and for a certain amount.

The market activity for the underlying securities and the options will likely be pretty flat, especially the day of the announcement.

Depending on how one is positioned with their options trades Fed rate hikes decision can affect ones trades for the short-term, say the week, much like an earnings announcement does.

Then there is the aspect of it not being if they raise rates or by how much, but that they also have to say in the commentary to follow their decision regarding the health of the economy and how things look in there, what seems like never-ending battle to stave off inflation.

How Active to Be the Week of the Fed Announcement on Interest Rates

My team and I tend to scale back the amount of new options trades we choose to open on the week of the Fed announcements.  At least that Monday to Wednesday.  Post the announcement, once we get a gauge of the market direction from there we go back to normal and at least stay as active as we normally are.

Morning Reports Lists

Here is a look at the Morning Reports Lists the first of the trading week ending May 05, 2023.

I am not bringing this up for one to consider, but rather to at least see what options are seeing the various types of activity going into an announcement.  This is where the options traders are making their decisions.

See what these look like now and post the Fed announcement check in on these to see what happened after,  This gives you experience in options trading activity around a Fed announcement to help you better prepare and maybe know what to expect on future fed announcements.

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