Volatility Views

Volatility Views 612: Fed Sends Vol Market Into A Frenzy

Dec 20, 2024

Mark Sebastian, a contributor at optionpit.com, and Rich Excell, director at the University of Illinois' Derivatives and Trading Academy, dive into the recent chaos in volatility markets triggered by the Fed's announcements. They discuss trading strategies amid rising inflation concerns and explore the intricate dynamics in international volatility, particularly in Europe. Both guests share intriguing insights on VIX and VSTOXX predictions while considering the effects of political events on market trends, making for a lively and informative conversation.

01:07:19

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Episode guests

Rich Excell

Mark Sebastian

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Quick takeaways

The Federal Reserve's unexpected 25 basis point rate cut led to significant volatility in the S&P market, highlighting market unpredictability.

Various trading strategies, especially options for hedging and straddle pricing, are crucial for navigating fast-moving market reactions to economic events.

International volatility, influenced by upcoming European elections, shows a disconnect between U.S. and Eurozone sentiment, presenting unique trading opportunities.

Deep dives

Market Reactions to Fed Decisions

The week featured significant market reactions to the Federal Reserve's decision to lower interest rates by 25 basis points amidst ongoing inflation concerns. Many traders had expected a cautious approach from the Fed, leading to volatility in the stock market, particularly as the S&P fell over 3% in response. This volatility was compounded by a disconnect between VIX cash, which peaked at around 27, and the expiration of December futures, creating a complicated trading environment. The market's initial shock was attributed to a surprise inflation indicator that shifted trader sentiment, showcasing the unpredictable nature of financial markets.

Intro

5min

Market Volatility and Federal Reserve Impact

12min

Navigating Volatility Amid Federal Reserve Announcements

5min

Market Expectations and Strategic Positioning Ahead of a Busy January

1min

Navigating International Volatility Amidst Political Turmoil

5min

Analyzing European Market Dynamics and Political Influences

3min

Navigating Tariffs and Volatility

27min

Market Predictions and Educational Insights

10min

On this episode Mark is joined by:

Mark Sebastian, The Option Pit
Rich Excell, Derivatives and Trading Academy, Gies College of Business - University of Illinois, Urbana-Champaign

They discuss:

The latest in the volatility markets in the US
The impact on volatility this week due to the Fed announcement
The international volatility market (VSTOXX)
The impact on volatility due to upcoming European elections
Interesting trading activity and developments in VSTOXX, VIX, SVIX, UVIX, UVXY and VXX
Their Crystal Ball predictions for VIX and VSTOXX
And much more...

Brought to you by Eurex and Public.com

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