The current derivative pricing reflects a mere 1% chance of an interest rate hike during the upcoming Federal Open Market Committee (FOMC) meeting on March 18. Historical data shows that the Nasdaq-100 (NDX) has experienced an average move of +/-0.83% on FOMC days, notably lower than the +/-0.94% average on all trading days in the same period. Recent FOMC announcements have led to muted market reactions, with the last meeting resulting in a 1.43% drop.
Notably, option sellers have benefitted from the minimal volatility surrounding FOMC days, often realizing profits from straddles that were overpriced. For instance, a bullish bet made by a trader on March 17 yielded a profit despite NDX closing lower. Additionally, various bearish trades also generated profits given the limited upward movement during FOMC days.
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