Jul. 30th, 2025 Option Outlook

FOMC Day!

Good Morning! As China-US Trade talks wavered, the market did too, closing .4% down.

The base case is that we will hover around 6400. FOMC event vol is relatively small, as the 1-day straddle is only $33 in SPX when normal 1-day straddle has been roughly $26-$29 recently. While that is small, FOMC has adhered to the 1-day straddle width in the past few meetings. We know what the FOMC will do, and JPow has been extraordinarily measured in the face of tremendous executive pressure to cut rates. I think history will be very kind to JPow, doing what was right instead of what is easy. FOMC is upon us today, what does the option plane look like?

For now, it seems like the bounds are at 6340 and 6400, as those are the big condor strikes. Otherwise, I would expect FOMC to result in a return trip to 6400. Remember that FOMC is followed tonight by the BoJ, META earnings, and MSFT earnings, not to mention the jobs number on Friday along with the tariff deadline. So, if you are playing FOMC, be nimble. FOMC initial reactions are often not the predicted one, they happen the next day including on the dealer positioning side. With the additional datapoints, making moves for the end of the week is much more speculative.