Summary

• This Wednesday brings us the first FOMC meeting with Kevin Warsh at the helm. It is likely markets will be braced for the outcome and statement.
• Our focus is the option market pricing before and after the announcement using 1-day options expiring on the close on FOMC day.
• The average price change over the past twelve FOMC announcements is +/-0.75%. This figure has been trending lower.
• This less than average price change on FOMC days has resulted in the ATM straddle overpricing the last ten of twelve announcements.

By Russell Rhoads, PhD, CFA, Associate Clinical Professor of Financial Management at the Kelley School of Business at Indiana University

This Wednesday brings us the first FOMC meeting with Kevin Warsh at the helm. It is