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What Options Are Saying About A Possible September Rate Hike
While 75% of 'expert economists' expect The Fed to raise rates in September, Goldman Sachs warns that if investors are worried about a September rate hike then it is not being priced via S&P 500 options...
September it is?
But what is the options market saying? Nothing to see here.
If investors are worried about a September rate hike then it is not being priced via S&P 500 options. Exhibit 1 shows the term structure of S&P 500 implied volatility. If investors were pricing event risk via S&P 500 options then we would expect to see a kink in the curve the week of the September 16-17 FOMC meeting. The typical tent-shaped pattern surrounding an event is not currently present. Instead of pricing additional risk at one point, S&P 500 options seem to be pricing additional risk throughout the entire curve post the September FOMC meeting (a parallel shift).
A few other highlights:
- S&P 500 1m 50 delta implied volatility ended last week at 11.3. One-month twenty-five delta calls dropped to 9. S&P 500 ten-day realized volatility is 10.4; one-month is at 10.
- Exhibit 1 plots the implied volatility for S&P 500 options from -10% OTM puts to +10% otm calls. The entire 1m implied vol curve is trading ~1.5 vol points below its 2015 average.
- The S&P 500 1m straddle is pricing in a +/-2.6% market move over the next month. That corresponds to break-evens of 2146 and 2037.
- S&P 500 1m 25-delta normalized skew is currently in-line with its 1y average.
What about the VIX market?
A big caveat when looking at the VIX futures or VIX options market. VIX options expire Wednesday September 16. Therefore they do not cover the FOMC press conference on September 17. S&P 500 options expiring Friday September 18th do. The VIX ended last week at 12.8. The VIX futures curve is showing no distinct event risk either. VIX 25-delta call implied volatility ended last week trading at 103.5, slightly below its 1y average of 106.
Source: Goldman Sachs
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Time to go short er.
If they are not expecting it, the asswiping anyone who is long by those of us who are short in the right ETF's and sectors will be a Wang Chung party time. Sweet.
Well, looks like the professional economists are at odds with the general consensus of real money being placed in the casino.
Who ya' gonna believe?
The market or the talking heads?
ya know...as far as I can tell, Paul Volcker is still alive. Has anyone seen him or heard an interview from him about anything going on over the last 8 years??? How come nobody drags his ass out into this whole conversation about the economy these days? He's just as responsible for how fucked up this is as anyone else is.
What...cuz he's old and "retired" means he can't be held accountable for anything???? I call serious bullshit on that. Fuck him. If he's still alive then there should not be any fucking statute of limitations on any criminal actions he's responsible for.
How come that pussy can't come out and talk some shit? I'd like to hear what he thinks about how fucked up all this shit is. Doesn't he make any appearances? Probabaly not...doesn't want to field any questions about any of the bullshit he pulled while he was running things.
Same with the Bernank.
Old Janet Fellen isn't solely responsible for all of this. Every motherfucker who ran the Fed Res and the Treasury in collusion should be hung at high noon in front of the fucking Capital.
So if he's still alive I think he should still be held accountable just like Greenspan should be and anyone else who ran the criminal and treasonous NON-Fed Reserve.
Can't believe we're still talking about something that they promised to do after QE1, "sometime in 2010".
Whether they raise rates or not, the public explanation why will be a lie.
hmmm...speaking of Vocker
http://kingworldnews.com/paul-volcker-and-the-ultimate-threat-to-the-glo...
Goldman Sachs are a bastion of honesty & reliability. It is so kind of them to share their worldly knowledge with us unsolicited.
… Mr. Volcker is a HIDEOUS REMINDER of that HATEFUL, OFFENSIVE conspiracy to have the Federal Reserve run by CHRISTIANS.
Do the opposite of GS public advice: they are selling that shit.
I can believe it. TINA told me so.
ZIRP4EVA
You obviously don't know Jack Shit about Volcker. Were you alive when he ran the Fed? Certainly the best fed Chair in the past 50 years.
The market has predicted 0 of the last 12 recessions. My money is on my eyes and ears.
We be fawked.
Who you gonna believe, the market or your lyin' eyes?
something is not priced in already?
does not compute
if it's not priced in means that people bets are that rate rise it's not going to happend, independently of whatever these economist think. Money speaks louder than words.
Everyone knows they won't. Forward guidance is dead. Any hike now is a surprise.
wrong
the feds has been cornered by the Chinese, they have to raise rate to save their power. we have a real war going on
hence, you better watch that explosion in china again , that's a nuke device
"....I ask if China’s strategy is … “In order to destroy the dollar permanently make it stronger temporarily.”?
ETFs are telling Wait What that not only is the Fed not going to hike in September, but it will re-engage a very visible QE4, sending US stocks screaming higher.
Maybe that's the point...
Peter Schiff is right. No rate hike.
All Smoke and mirrors.
In fact there's a 99% chance of QE4.
It's printing and currency wars until someone blows up.
Peter Schiff kicks ass, and yes he is right. He's pretty much been right for several years now.
He was just on Alex Jones on Friday and his dad, Irwin Schiff, is still in Federal prison now after over 10 years (he's now 87 years old), and is the only true political prisoner of the United States condemned for life because he wrote and sold a book that claims the Federal Reserve and the IRS are un-Constitutional and illegal!!!!
The book is still allowed to be sold...but just not by Irwin Schiff and that's why he's in jail.
It's called, the Federal Mafia and can still be purchased (for a very high price) on Amazon!
http://www.amazon.com/Federal-Mafia-Illegally-Unlawfully-Collects/dp/093...
He's now dying of lung cancer and the U.S. SCUM won't let him out to live his last days in peace with his family.
You can download a free PDF of the book at this link:
http://www.paynoincometax.com/pdf/federal_mafia.pdf
Download it and send it to everyone you can. But Irwin Schiff sits in a federal prison today at age 87 dying of lung cancer because he will not tell the federal gov-scum that the IRS is legal! He will not give up even though he has to sit there year after year with a virtual death sentence even though he has committed no violent crime what-so-ever.
The fed gov-scum violated his 1st amendment right to write and sell a book based on his legal opinions and they gave him a life sentece in jail for not backing down.
THAT'S HOW FUCKED UP THIS FUCKING CRIMINAL SCUMBAG SICK SOCIOPATHIC MARXIST BULLSHIT SO-CALLED "GOVERNMENT" IS!!!!!!!!!!!!!!!
I can't get that pdf link to go. The book burners might have been active.
Thanks for the link. I got it to work, but it was a little slow to upload, even on my wicked fast Mac. Love free PDFs rather than paying some douchebag Amazonian $80.
The dude is right, you know. IRS, in fact, all government, is a total fucking scam.
A bunch of meaningless charts that algos don't give a shit about. Of course a rate hike isn't priced in. It will be priced in a couple milliseconds after the Fed leaks the hike date and time.
things are so fucked up now they can probaly do a rate hike and QE in tandem. This is a national security issue now afterall; at least untill empire goes boom
LMAO! Why not both!?!?
Regards,
Cooter
As an Economist (and Engineer), I would not be surprised if they do something totally fucked up. Like raise Federal Funds rate by .125 and impliment QE4 of a few hundred billion.
Rge CBs are Soooooo effed up now. Look how ECB has faile - i.e. 10 year bund.
The only reason the Fed would hike rates is to push the Federal Govt into default faster.
good questions on Volcker...but he is/was merely a employee of David Rockefeller his whole life...and David is still alive...would be interesting to hear from him as well, but it seems he only does interviews with Ben Fulford and that was what 8 years ago?
this planet is weird.
And Fulford is the worst disinfo agent, likely ever.
What that first graph tells me is that in January, over 70% of economists were wrong since they predicted a rate increase before September.
Fuck these bastards, the only way to win is not to play.
Too right!
I sold out all my compamy stock in late 2012 and cancelled my stock purchase agreement.
Did well with that, we have title to all our properties now and cash in SEVERAL banks outside the USA and Canada (all the banks we have cash in are in this list https://www.creditmutuel.fr/groupecm/fr/images/fichier_pdf/communique_pr...).
But the company PUMPS are filling my email box to get back into the stock purchase plan.....NO....Fffing...way. Cash in my hand thank you very much.
They all laughed when I sold....did well but not right at the peak. But then, if you've done any investing in your life you know you will never buy at the bottom or sell at the top. If you're in the general vicinity of both, you've done well.
They're not laughing now...the stock is down 30% form where I SOLD...and falling. Business is tanking.
People need to get the Fxxk out now. Its a single door exit and 30 million people are going to try and get out at the same time.....that won't be pretty.
Don't play, you are EXACTLY correct.
Squid
Never gonna happen, says Bush.
i don't need options activity to tell me that
Doesn't this just mean that the experts expect a hike sometime after September, but don't know when? The risk of a hike is being spread out evenly after September instead of discreetly at FOMC meeting dates. The headline made it sound like the market wasn't pricing in the risk at all.
There will be no rate hike in September.
Expect a 5% market pop on that news.
The Federal Reserve will do anything to keep stocks up and the 0% money junkies happy.
It's 0% until a currency crisis.
The US Fed adopted Zimbabwe economics. Print until the currency dies.
There's a 99.9% of QE4. Maybe we will get QE5, QE6, QE7, QE8, QE9.
Peter Schiff and Richard Duncan believe the Fed is forced to keep QE going until it blows. Their sure of it.
Look at all the printing Japan has done. It hasn't blown up yet. It should.
September is just a Yellin cock tease (ehwwwuuuuu...).
In a week or so Pajama boy Hilsenrat will send up a ballon that Fed is 'concerned' about 'deflation and FX instability' from China.
Next stop in the virtual reach around will be 'for sure in December'
The rates will go up in Sept, or Dec, or March 2016, or June, or Sept, Dec, NO WAIT REALLY AND TRULY, cross my heart and hope to die, It will be 2017 March, or June …… JOHNLGALT
The rates will go up in Sept, or Dec, or March 2016, or June, or Sept, Dec, NO WAIT REALLY AND TRULY, cross my heart and hope to die, It will be 2017 March, or June …… JOHNLGALT
The Fed is so full of crap.
Then they have William Dudley's knob polisher, Hilsenrat, who will leak out whatever he's instructed to say.
How many times pros had it right, gfc!
Rate hike; rate smaltz. Geez, how much more crap can be written about a nothing event. This hike, which is all of a .25 of 1% will have as much impact as Yellin lifting up her left cheek and farting. If it happened without announcement, you'd never know it for all the impcat it will have on over all interest rates. Gift it a rest, already.
Rate hike?
In a pig's eye.