BY ANDREW GIOVINAZZI
September 15th, 2025
Yo Pit Crazies,
I’ll be sharing my early take on what I expect for Wednesday’s FOMC meeting — and Mark will be doing the same right here.
The VIX moved higher today ahead of the Fed’s decision, which is likely to shape rate policy for the year ahead.
A year is a long time — especially when the VIX only looks 30 days ahead.
Mondays typically see a VIX bump due to the ‘Weekend Effect’: traders discount options on Fridays to avoid weekend time decay, which suppresses volatility at the end of the week and lifts it after the weekend.
So the question is — was today’s spike just the usual Monday move, or a signal of something more serious?
Traders have to keep the short term option prices about the same
As we get closer to Wednesday’s event, the expectation of a big move remains — even as time runs out. Notice the three elevated SIGMA IVs below; these represent the average implied volatility for their respective terms and are elevated because those options are likely to react the most to the Fed’s decision on Wednesday afternoon.
The SPDR S&P 500 Trust ETF (Ticker: SPY) September 19th 660 straddle closed at $7.80 today, down from $8.00 at Friday’s close. That’s just $0.20 of decay over three days on a straddle that’s expected to lose about $1.00 per day — indicating traders are still pricing in significant movement.
Market makers are keeping option prices elevated despite the passing days, which is helping to nudge the VIX higher.
Right now, the market seems to be underestimating how much a rate cut could move stocks — but that’s changing, as more traders are snapping up options ahead of Wednesday’s announcement. I’m holding my positions in interest rate-sensitive names, since I expect a move once the FOMC decision hits.
We could even see stocks dip on Tuesday if traders get nervous early. The VIX will almost certainly climb into Wednesday — but it’ll take a major Fed surprise to keep it elevated afterward.
To Your Trading Success,
AG