With the FOMC meeting due later today and about 70% odds rates will remain unchanged. I put on the following trade yesterday morning. A simple conservative 2-lot PUT Credit spread on RUT with short strike @ 1140 and long strike at 1130. However, for protection, should FOMC "surprise" the majority, I would expect RVX to move to around 34 (a 10% Vol increase from when I placed the trade) and expect RUT to quickly drop to about 1100), so for insurance bought a 1020 strike PUT. If this goes bad (FOMC raises rates, market drops near my estimates), then the PUT will limit my losses and allow me to EXIT my position with a minor Loss (peanuts). If the FOMC does not raise rates and market moves up (expect Vol to drop about 3% and price to go to about 1200, then my PUT is near worthless, and I reduced my potential profit by about 25%. That OTM PUT should prop up my PnL for enough time to allow me to exit the Credit spread, then close the PUT with a minor loss, or possible slight gain. Check out the Open Interest on the RUT SEP Quarterly 1020 PUT. Others seem to have interest in this strike as well. So, three conditions seem likely: 1) FOMC kicks can down road again, and the market rallies. (can hold trade for 1-2 weeks to squeeze out maximum profit, or exit trade Tomorrow for about 50% of max profit potential) 2) FOMC bits bullet, raises rates, and Market scrambles for cover. (exit position today or tomorrow AM for slight? loss) 3) FOMC kicks can down road again and market remains mostly unchanged. Probably a dull trade for this case, and seems to be least likely outcome. Am curious if someone spots an issue with this trade.
Do you know what time? All the news reports have omitted the time, but I think it's 2PM EST. IMO ......The market will tank if no change, and sore if rates raised.
OTM-Options: Here is what I found: The main event starts at 2:00 p.m. ET, when we get the Fed's decision on whether it's raising its benchmark rate for the first time in a decade. This will be followed about half an hour later by a press conference with Fed chair Janet Yellen. You can read our full preview of the events here. Regarding your "IMO" <-- very logical! Either we follow the pattern of Greece, or do something! ;-)