What Fed meeting?

options market analysis • Federal Reserve • S&P 500

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Options traders are expecting an unusually low market impact from the Fed this week. S&P 500 options imply an expected price range of $1989 to $2051 (1.6% move) through Friday. Since 2009, 42% of weeks (159/377) had realized moves greater than 1.6%, and the average move across all weeks was 1.7%. Is this really just going to be another average week?

Traders aren’t only expecting U.S. markets to be unusually sleepy. Short-term vols for the euro, IG corporate bonds, Treasuries, Euro Stoxx, and even Chinese equities are all sub-35th percentile over the past year. A whole host of macro and single-name upside and protection plays that would have been prohibitively expensive just a few weeks ago are now tenable again.

Notable options markets

Vols that remain high: S&P Metals and Mining, Brazil, CAD/USD.

Historically attractive put-writes: Freeport McMoran, Tesla, S&P Biotech.

Historically attractive covered calls: TripAdvisor, GameStop, Viacom.

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