{"id":235763,"date":"2025-12-09T13:00:00","date_gmt":"2025-12-09T18:00:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=235763"},"modified":"2025-12-10T04:37:04","modified_gmt":"2025-12-10T09:37:04","slug":"options-market-expectations-for-the-fomc","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/options-market-expectations-for-the-fomc\/","title":{"rendered":"Options Market Expectations for the FOMC"},"content":{"rendered":"\n<p>For the past few days, global stock and bond investors have been keenly focused on tomorrow\u2019s FOMC meeting.&nbsp; Fed meetings are one of the key \u201cknown unknowns&#8221; that affect markets.&nbsp; Even when we have a strong sense of what is likely to transpire \u2013 in this case, there is a strong consensus for a 25-basis point cut in the target rate \u2013 we still look eagerly for clues about the future path of monetary policy.&nbsp; We discussed <a href=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/fed-funds-drove-spx-now-what\/\">several of those considerations yesterday<\/a>.&nbsp; Today we focus on how index options traders are positioning ahead of the meeting.&nbsp;<\/p>\n\n\n\n<p>Some of you might be noting that we have typically published this sort of analysis on the morning of the upcoming meeting.&nbsp; I have decided to move that one day forward because our publication timing does not always offer enough readers sufficient time to consider this analysis in their own positioning.&nbsp; Thus, even though the options market might move between this morning and tomorrow, it seemed more valuable to offer these viewpoints a day prior.&nbsp;<\/p>\n\n\n\n<p>Once again, we see the probability distributions for S&amp;P 500 (SPX) options expiring tomorrow and Friday showing an upside bias.&nbsp;&nbsp; That has been a typical occurrence in recent months.&nbsp; One can think of this as \u201cFOMO insurance\u201d, a way for relatively cautious investors to hedge their caution with out-of-the-money calls.&nbsp; Or, one can simply think of it as playing the odds.&nbsp; Over the past three years, it is more typical to see stocks rise than fall.&nbsp; It is not unreasonable for daily expiring options to expect that pattern to persist.&nbsp;<\/p>\n\n\n\n<p>There may be fundamental logic behind the current bias too.&nbsp; <a href=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/fed-funds-drove-spx-now-what\/\">As we pointed out yesterday<\/a>, expectations for cuts at the next three meetings are in the 20-30% range.&nbsp; Thus, there is more room for excitement about increasing odds for a cut than there is room for disappointment about rhetoric implying otherwise.<\/p>\n\n\n\n<p>For options expiring tomorrow afternoon, we see a peak probability around the 6,900 level.&nbsp; That would be above the current record close of 6,890.89, set on October 28<sup>th<\/sup>, the day prior to the last FOMC meeting, but below the intraday record of 6,920.34, which was set on the subsequent morning, about four hours prior to the rate announcement.&nbsp;&nbsp;<\/p>\n\n\n\n<p><strong><em>IBKR Probability Lab for SPX Options Expiring December 10<sup>th<\/sup>, 2025<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"474\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-25-1100x474.png\" alt=\"IBKR Probability Lab for SPX Options Expiring December 10th, 2025\" class=\"wp-image-235766 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-25-1100x474.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-25-700x302.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-25-300x129.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-25-768x331.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-25.png 1310w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/474;\" \/><\/figure>\n\n\n\n<p><em>Source: Interactive Brokers<\/em><\/p>\n\n\n\n<p>Options expiring on Friday show a slightly higher peak probability centered around the 6,910 level.&nbsp; That too would be above the current record close but below the intraday record high.<\/p>\n\n\n\n<p><strong><em>IBKR Probability Lab for SPX Options Expiring December 12<sup>th<\/sup>, 2025<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"473\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-23-1100x473.png\" alt=\"IBKR Probability Lab for SPX Options Expiring December 12th, 2025\" class=\"wp-image-235764 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-23-1100x473.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-23-700x301.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-23-300x129.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-23-768x331.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-23.png 1308w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/473;\" \/><\/figure>\n\n\n\n<p><em>Source: Interactive Brokers<\/em><\/p>\n\n\n\n<p>For the most part, implied volatilities for at-money options are generally in line with the long-term historical one- and three-day moves around FOMC meetings, though well above the very small moves that occurred on the last four FOMC announcement dates (see table at bottom).&nbsp; We see daily implied volatilities for at-money options expiring tomorrow, this Friday, and next Friday at 1.02%, 0.98%, and 0.92%, respectively.&nbsp;&nbsp;&nbsp; The relevant comparison in the table below is to the average absolute value daily moves \u2013 remember volatility doesn\u2019t measure direction, just movement \u2013 of 1.15% for FOMC day and 1.24% for the three-day period.&nbsp; Skews show a relatively typical amount of risk aversion, with a pronounced asymmetrical steepness in options expiring tomorrow that diminishes over the coming expirations.<\/p>\n\n\n\n<p><strong><em>Skews for SPX Options Expiring December 10<sup>th<\/sup> (top), December 12<sup>th<\/sup> (middle), December 19<sup>th<\/sup>, 2025 (bottom)<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"632\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-24-1100x632.png\" alt=\"Skews for SPX Options Expiring December 10th (top), December 12th (middle), December 19th, 2025 (bottom)\" class=\"wp-image-235765 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-24-1100x632.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-24-700x402.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-24-300x172.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-24-768x442.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-24.png 1315w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/632;\" \/><\/figure>\n\n\n\n<p><em>Source: Interactive Brokers<\/em><\/p>\n\n\n\n<p>With another day to trade ahead of the announcement, things can indeed change between now and then.&nbsp; This afternoon\u2019s 10-year Treasury note auction can certainly influence equity market perceptions, and crypto traders seem to be taking advantage of the relative torpor in other markets to gun prices in their favorite currencies.&nbsp; Yet barring major exogenous news, it is difficult to foresee expectations differing too much in the ensuing period.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1100\" height=\"1306\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-26-1100x1306.png\" alt=\"\" class=\"wp-image-235767 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-26-1100x1306.png 1100w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-26-700x831.png 700w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-26-300x356.png 300w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-26-768x912.png 768w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/12\/image-26.png 1153w\" data-sizes=\"(max-width: 1100px) 100vw, 1100px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/1306;\" \/><\/figure>\n\n\n\n<p><em>Source: Interactive Brokers<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For the past few days, global stock and bond investors have been keenly focused on tomorrow\u2019s FOMC meeting.\u00a0 Fed meetings are one of the key \u201cknown unknowns&#8221; that affect markets.\u00a0 Even when we have a strong sense of what is likely to transpire \u2013 in this case, there is a strong consensus for a 25-basis point cut in the target rate \u2013 we still look eagerly for clues about the future path of monetary policy.\u00a0 We discussed several of those considerations yesterday.\u00a0 Today we focus on how index options traders are positioning ahead of the meeting.\u00a0<\/p>\n","protected":false},"author":4,"featured_media":115628,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":""},"categories":[6,19,8,9,26,3],"tags":[],"contributors-categories":[13576],"class_list":{"0":"post-235763","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-north-america","8":"category-options","9":"category-region","10":"category-securities","11":"category-text-articles","12":"category-traders-insight","13":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Options Market Expectations for the FOMC | Traders&#039; Insight<\/title>\n<meta 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investors have been keenly focused on tomorrow\u2019s FOMC meeting.\u00a0 Fed meetings are one of the key \u201cknown unknowns\" that affect markets.\u00a0 Even when we have a strong sense of what is likely to transpire \u2013 in this case, there is a strong consensus for a 25-basis point cut in the target rate \u2013 we still look eagerly for clues about the future path of monetary policy.\u00a0 We discussed several of those considerations yesterday.\u00a0 Today we focus on how index options traders are positioning ahead of the meeting.\u00a0","og_url":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/options\/options-market-expectations-for-the-fomc\/","og_site_name":"IBKR Campus 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He has held numerous roles in the organization since joining Timber Hill, IBKR\u2019s predecessor, in 1995 as Equity Risk Manager and an options market maker. He developed and implemented automated trading strategies for stocks and options before moving into his current role. Steve has guest authored several columns in Barron\u2019s and made numerous live on Bloomberg TV and Radio, CNBC, Yahoo Finance, Fox Business, and several other media outlets in North America, Asia, Australia, and the Middle East in addition to being quoted frequently in print and electronic media. Prior to joining Interactive Brokers, Sosnick held senior trading roles at Morgan Stanley, Lehman Brothers, and Salomon Brothers, where he completed the firm\u2019s famed training program.","sameAs":["https:\/\/ibkr.com"],"url":"https:\/\/www.interactivebrokers.com\/campus\/author\/steve-sosnick\/"}]}},"jetpack_featured_media_url":"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2021\/12\/FOMC.jpg","_links":{"self":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts\/235763","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/comments?post=235763"}],"version-history":[{"count":0,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/posts\/235763\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/media\/115628"}],"wp:attachment":[{"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/media?parent=235763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/categories?post=235763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/tags?post=235763"},{"taxonomy":"contributors-categories","embeddable":true,"href":"https:\/\/ibkrcampus.com\/campus\/wp-json\/wp\/v2\/contributors-categories?post=235763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}