Fed Rate Decision Live: What Options Priced In

The same thing, in writing

Before the decision: rates and the VIX

We went live from New York 37 minutes before the Fed decision on Wednesday, September 16. The 25 basis point hike was, in Larry's words, 100 delta. The data said it was necessary even though some quarters hoped the pressure from the White House would keep rates unchanged, and the non-farm payroll number had come in substantially higher a week earlier. Rates had crept higher over the previous week, with the 30 year at 5.33% and the 10 year at 4.95%, both about four basis points lower on the day.

The VIX sat at 16.83. To turn that into a percentage move, divide by 3.46, which is the square root of 12. That gives a 4.86% 30 day implied move in the S&P 500, assessed from upside calls and downside puts rather than the straddle. The Clarity Act cloture vote had failed the day before, which Larry had put at about an 18 delta earlier in the week, and Strategy was down 3% at 125.71. Crude had eased about 2%, with the October WTI future just over 102 and November Brent just under 106. The Dow was flat, the S&P up three tenths and the Nasdaq up seven tenths.

IBIT and how to read skew off the chain

With IBIT at 42.86, the October 16 expiry priced an implied move just under 8.5%, against an average move for that window just under 13.5%, so the options screened cheap. The 43 straddle was $3.64, and 3.64 divided by 42.86 is 8.49%. At 1,766 IBIT shares per bitcoin, 42.86 times 1,766 is 75,690, against a bitcoin price of 75,658.50. In the Terminal's chain the strikes inside the implied move are highlighted green, and the moneyness column shows the 40 strike 6.6% below spot and the 39 strike 8.9% below, which is why the 39 is not highlighted.

For skew, look $4 either side, about 10%. The 39 puts were 52 cents at a 19 delta and the 47 calls were 55 cents at a 22 delta. Three cents apart means there is basically no skew. If the calls were 70 or 80 cents the chain would be skewed to the upside, and if the puts carried more premium than the calls it would be skewed to the downside. The vol smile module gives the same clue at a glance, and the settings menu lets you change the accent colour, the up and down colours and the row density.

SPY: what the straddle priced against what the index usually does

SPY was at 759.83. The October 16 expiry, exactly 30 days out, showed a 3.10% implied move against a 4.58% average move. The average is configurable: it takes the 30 day return day by day over a 100 day lookback, not annualised, and it is not specific to this time of year. In a single name that window can contain an earnings event, so the Terminal shows the historical earnings moves separately. Larry noted that someone had put zero DTE at 40% of all S&P option volume, and that nothing compels anyone to trade it.

The 760 straddle had a call mid of $12.01 and a put mid of $11.59, so $23.60 divided by 760 is 3.10%. Ten percent down, the 685 put was $1.47. Ten percent up, the 835 call was five cents, double nickels in pit jargon. Five percent either side, the 722 put was $3.55 and the 798 call was 63 cents. The 10% downside put cost the same as the 4% upside call, which is a two and a half times skew to the downside. Larry's point was that the biggest desks, Susquehanna and Jane Street among them, are staffed by former pit traders, and you cannot ignore how they price the wings and the term structure.

Covered calls, put-call parity and the collar

A long only book can monetise the upside instead of staring at it. With GameStop at 21.66, the October 16 24 calls were 50 cents. Selling 10 calls against 1,000 shares puts $500 in the account the day the calls are sold. If the stock trades through 24 the shares are called away for another $2.34 of gain, and below 24.50 the position is still ahead. Rolling means buying the short calls back and selling the next month, then stepping the strike up as the stock climbs. Larry did exactly this with GameStop bought at 26 before a drop to 20 and rolled his way back to breakeven.

Put premium and call premium are tied together through put-call parity, which is the basis of the reversal and conversion carry trade covered in the cost of carry video. The collar is the other structure worth knowing. With a stock bought at 70 and now at 100, buying the 90 put and selling the 110 call protects the downside for close to zero cost if the two wings trade at similar prices, and the collar rolls up as the stock approaches the short call.

The hike lands

The statement came out with a 25 basis point increase, the first since 2023, and a signal of one more before the year is out. The S&P was unchanged, then a touch higher. The VIX ticked up but stayed just below 17. The Treasury curve did not move. The dollar index was around 99.85 and crypto was off about 40 basis points. Seventeen minutes later the S&P had dipped to plus 0.2% and recovered to plus 0.35%. December Fed funds futures around 4.11 pointed to another hike, which is what the Fed had just said. The macro inputs to keep watching are crude, rates and the PCE at the end of the month.

Beta ties single names back to the index. If the VIX implies roughly a 5% 30 day move and a stock has a beta of 1.5, its own 30 day implied move should be about 7.5%. That is magnitude, not direction. Dispersion books at the vol funds trade the gap between the index and its constituents as it widens and narrows.

Earnings, beta and the stock replacement trade

Earnings are a fast way to learn how moves are priced because the answer arrives at 9:30 the next morning. Oracle's last report had a straddle breakeven of 11.77% and the stock moved 7.51%. The September 2025 report moved 32.16% against a 7.77% implied, on a jump in remaining performance obligations to $455 billion. Now the RPO figure is around $660 billion and the stock is $143, roughly $200 lower than it was then. Larry's view is that the big desks do not hire on candlesticks, and that variance structure is worth checking alongside any technical read.

ApexVol has Basic, Premium and Pro plans. Premium is $95 a month. Apple is free on every plan, so the full Terminal can be tried on AAPL without a card, and the other tickers come with a 7 day trial. With Apple at 334, 1,000 shares cost $334,000, while ten September 30 250 calls at $84.40 cost $84,000, about a quarter of the outlay, and can be rolled at expiry. That is the stock replacement trade. Larry has traded vol since 1980, and both our emails are on the site for anyone who wants a call. The next video is a navigation walkthrough of the Terminal's 51 modules.