Fed Meeting/Quarterly OPEX Vol Trades

Similarities with January/Using the pin tendencies

The gravitational pull of 6000 is obvious, and while to be sure, there are a lot of calls rotating around the Mag8 names, the market has been hogtied with the humongous open interest for the special opening quotation settlement on the morning of June 20th:

We’ve been here for over a week now, and while we wait for CPI tomorrow, it’s time to start looking at Fed and opex vol opportunities. And my approach is to go back and find similar implied vol landscapes to see how the market actually priced these spreads when it was time to close.

So, we can see very similar price action for weeks at the beginning of the year, where the closes are most often higher than the open and the tendency is for minor drops to be repaired:

We’ve only had a single -1% day for SPX in seven weeks (the only one being May vixpiration, shocker), so this price action of open to close is superb weather for the short vol mafia and yolo 0dte call crowd; and with this gravitational pull of 6000 they can come in nearly every day and sell puts without a sweat almost daily.

9-day vix, my preferred implied vol measure these days, since that captures the window where the majority of options trade, it has also succumbed to levels from the beginning of the year. The Tuesday before the Fed meeting on January 29th it was 16.6, today it is 15.5:

And the straddle prices for the Fed meeting day, they had been sold down to around 40 points the day before the Fed meeting. Which is about what we are seeing as the prices for straddles for CPI tomorrow:

So being in a similar environment, we can go back and look at spread prices for a few vol trades, both being long Fed day vol, selling Fed day vol and selling Fed day reaction/SPX quarterly opex vol.