FOMC @ 2:00 PM EST reaction will see one of 3 Events:
1. 75BPS is priced - leading to a move higher to recent intra-week Highs.
2. 75BPS is priced - leading to a tighter range into Powell.
3. 100 - 125 BPS is not priced - leading to a breakdown and a VIXplosion to 31 and VIX Curve inversion.
Powell's conviction @ 2:30 PM EST sets the Equity Complex in further motion of which there are 3 events:
1. Powell indicates the FED is making progress but needs to see further Data and intends to remain vigilant.
2. Powell indicates the FED sees further Risks to Inflation and needs to bring Fed Funds aggressively towards the Inflation Rate.
3. Powell indicates the FOMC's trend toward Higher Rates will need to remain consistent in order to maintain stability with November an important timeframe for the FED.
As does the US Dollar - Any spike above 110 leads to 111.71s.
Dot Plots, Terminal Rates... will all see an adjustment, one that has made higher velocity movements recently.
The Yield Curve - with 1's over 4%, 2's approaching 4%, and a new Inversion dipping into prior lows and exceeding them @ - 0.487% - doubling the prior 2 most recent curve inversions.
The Market Signals are quite clear - indicating the FED will raise 100BPS as a flood of Global Central Banks Rate decisions are set in motion this week and next.
Competition is building among them. Powell will not be sanguine.
That will not happen today IMHO.
Powell will be direct in the extreme once again as the FED has no intention of back off until 8 months after their final rate increase.
This is the history of Interest Rate Cycles - this one will be shorter and far more volatile than prior cycles.
Time favors the Spread, if you are using leverage, the October Monthly Expiry is the safer Trade into an October Straddle - direction neutrality the higher probability of profit.
The tightest spread is preferred as the IV is elevated, should it come down, close the position as IV can move in either direction today, it is VIX Settlement.
Lack of volatility - is the lowest probability providing the performance.
The key to success is to close the position within a few days.
@option2022, Welcome, good luck today~! Using October's for Straddles and Today's Expiry for spreads.
herringbone_100
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cogent!
anothernic
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@herringbone_100, Except they didn't list the option basically no one expected: 75 bps but not priced in, market craters.
herringbone_100
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@anothernic, It was priced in. the market cratered after the manipulation up due to the what the HK_L61 said above-- "2. Powell indicates the FED sees further Risks to Inflation and needs to bring..." ---Another 1.25% in hikes by end of year, revised inflation up for eoy from 4.3% to 4.5%, and 3.1% for next year from 2.7% revised inflation up for end of next year to 4.4% from 3.9% blah blah blah. did u listen to daddy powell? he brought the house of cards down today, by what he said after the priced in 75bps. poster was right on the money.
anothernic
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@herringbone_100, Seems like mental gymnastics to me, but ok. OP says "FOMC @ 2:00 PM EST reaction will see one of 3 Events:" but none of those three were the result, as I noted. I did watch Jerry P talk. I watched the market ignore what he said until ~20 minutes later they came to terms with it too. I don't read much of that above either, though. I'm admittedly pretty new to all of this, and am probably just misreading.
The yearly / EOY / next year projections all seem spot on to a T, better than anything I could say, without doubt.
HK_L61
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@anothernic, Apologies if it was confusing. Perhaps you should have focused on the last section - sucking sounds... In our private trading group, we determined both Gaps would be filled. The Lower Trendline is being tested for the Indexes.
anothernic
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@HK_L61, I'll check out your prior posts, thanks for the clarification! Not trying to throw shade, just better understand other perspectives. Best, a
HK_L61
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@anothernic, You are too focused on rates... for over a month, I've explained why this is a mistake, as it is 1 of 3 Legs of the stool.