Tomorrow, the market will focus on the release of the U.S. unemployment report, arguably the most crucial economic data point in the near term. The anticipation surrounding this report is reflected in the options market, signaling heightened volatility as traders brace for the announcement. While international events have made headlines, this unemployment number remains the key to shaping market sentiment and guiding Federal Reserve policy. The unemployment number provides: Critical insights into the state of the U.S. labor market. Serving as an indicator for future economic growth. Inflation trends. Potential monetary actions by the Fed. As such, traders are already positioning themselves for what could be a significant move in the market following the release. Why the Unemployment Number is the Market's Focus In an environment where inflation concerns continue to weigh heavily on investors' minds, unemployment is one of the most influential metrics in determining the Federal Reserve's next steps. A higher-than-expected unemployment rate may signal that the economy is slowing, reducing the likelihood of further rate hikes. On the other hand, a lower unemployment number could reignite inflation fears and lead to tighter monetary policy. Given the centrality of this report, traders have been adjusting their positions accordingly. SPY is currently pricing in a 1.0% move for tomorrow, a slight reduction from the 1.1% move expected two days ago. The other major ETFs, QQQ and IWM, show expected moves of 1.2% and 1.7%, respectively, as traders prepare for the report's impact on the tech and small-cap sectors. While these expected moves are slightly lower than earlier in the week, the market's focus on the unemployment data remains clear. The implied volatility for October 4th options is still elevated compared to other expirations, signaling the importance of this data release. How the Market Anticipates the Unemployment Announcement The options market provides a direct window into trader sentiment ahead of major events like the unemployment report. By analyzing implied volatility and expected moves, we can gain insights into traders' positioning for the upcoming announcement. At ORATS, we use straddle pricing to calculate an event's expected move. We begin by determining the price of a long straddle, which involves buying both a call and a put option at the same strike price for the expiration immediately following the event (in this case, October 4th). This straddle price reflects the market's overall expectation for volatility. Next, we estimate the residual value of the straddle after the unemployment announcement using a custom distribution model we've developed specifically for event-driven data like this. The difference between the original straddle price and its post-announcement value gives us the expected move—in this case, 1.0% for SPY. This represents how much the market anticipates SPY could move once the unemployment data is released. More here...
Options before the NFP reports are such a ripoff. The volatility crush afterwards is ridiculous! Half of the value is lost in just one day. It's not even possible to hedge with them.
Also the US election day is right at the corner. Best to watch everything with a beer and stay out of the game until next week. Day traders are going to bite the bee hive quite heavily.
If they are so wildly overpriced, then take a page from Mark Brown and his mentor Stan and just sell them, and profit from that "vol crush." Dawn, you should stop posting until you learn how options work. Any basic text will do it. Stop posting nonsense. Structure in two expiries, neutralize delta and vega by ratioing components. That isolates gamma (effectively, the market price of jump risk). If you think that jump-risk price is too high, short it (long the implicit ratio-calendar-of-spreads), if you think that price is too low, long it. If you want to get fancy, split portions of the gamma-isolating structure among two different underlyings to layer on an RV component.
Yes that's all great when the volatility actually dies down after the event. But when shit happens and the volatility actually increases, this is what happens to your naked shorts: And he is not the only one. And this is what happens irl with those options. You either get huge volatility crush after the event when nothing happens if you were long or get steamrolled if the volatility really picked up if you shorted. You obviously don't trade and instead just reads basic text so you don't know. LOL You don't even know what I was trying to hedge? LOL You are trying to advocate your volatility arbitrage strategy, I get it but that's not hedging. And that's completely irrelevant to what I was talking about. Anyway...
If it is trendy (upper chart), then it is easy to earn $. If it is choppy (lower chart), then very difficult to earn $.
He's lucky he's alive. There are people who committed suicide because of the steamrolling of their naked shorts.