The reaction is where I think the real move is.

The last five times this Fed had a chance to move rates, they left them alone. Five meetings, nothing touched, and SPY still averaged about a 2% move in the week around each one.

Now put a presidential reaction on top of that, inside two hours of the announcement.

Below I’ll show you exactly what those five meetings did, what four separate presidential reactions were worth this year, and how you build a position that gets paid on a 3% move without having to know which way it goes.

Down 1%, down almost 2%, up 3.2%, down 2.4%, and up 4%.

That is what SPY did on five separate occasions when the Fed left rates exactly where they were. Five meetings, five non-events, and not one of them quiet.

So the idea that a hold means a quiet day has been wrong five consecutive times this year.

Then The Other Half

Now add the part nobody models.

We have a president who reacts to everything, in public, immediately, and I want to be careful how I frame this because I am not making a political argument. I could not care less what any of you think about his politics.

A tweet equals movement. That is the whole observation.

While everybody in my chat argues about what he is doing and where the money is going, the only thing that matters to me is that the guy posts something and the market moves.

Look at what it has been worth this year.

Threatening eight European countries with tariffs over Greenland in January gave you a 1.5% round trip.

The announcement of major combat operations in Iran a month later gave you 3% in a day. A forced labor and global tariff scheme in March gave you 3.5%, and new global tariffs a few weeks ago gave you another 3.5%.

And the biggest one, last year, produced a 10% rally in SPY in a single session.

We used to call these tape bombs when I was on the floor. Something would hit and the whole room would look up and say what the hell just happened. There were no televisions on the CBOE floor until after 2000, no cell phones, nothing but floor phones, so you found out when the paper showed up.

Now it arrives in everybody’s pocket at the same moment.

Why He Almost Has To React

Think about the position a rate hike puts him in.

The public sees the Fed raising rates to fight inflation, and higher rates slow the economy down.

A slower economy hurts his approval rating. That hurts the candidates he is backing in November, and if those seats go, the agenda stalls for two years.

That is a chain he cannot ignore, and he has advisors who will walk him through every link of it within an hour of the announcement.

So he grabs the bully pulpit and he bangs on it. Even if rates get left alone, he is going to say we needed a cut.

I consider a reaction a near certainty. What I cannot tell you is which direction it sends things.

What I Think Happens

The market has this at 92.3% odds of a quarter point hike. Right after Warsh spoke at Jackson Hole, that same contract was a coin flip.

I do not think they hike.

I think Warsh, who took the chair from Powell back in May, wants to prove he is looking at data. And the data right now is mostly oil prices.

Meanwhile the bond market has already done a good portion of the tightening for him. The 10-year crossed 5% again this week, which it has not done since the 2023 cycle.

Everybody spent years saying the world ends at a 4% 10-year. Here we are.

So my expectation is a 3% move on Wednesday, and I could be completely wrong about the direction.

Which is the point… 

I do not need to know.

Whatever rally we might get off a hold, we could sell off just as hard when the reaction lands. Both of those are the same trade if you build it correctly.

My job is to build something that gets paid when the waves come, and then be strapped in before they arrive. Predicting Warsh or the President is somebody else’s line of work.

Here is the timing, and it is tight.

The offer closes tomorrow at noon, the trade goes on at noon, and the Fed announces at 2pm ET.

So there are two hours between when I put this position on and when the thing it is built for happens. Miss noon and you are watching the move instead of being in it.

→ Get in before Wednesday at noon

P.S. On the July meeting the round trip was 2.23%. The calls were up 50% on the day of the announcement because of the gap, and then on the way back down the put spread was up 30%.

Both halves paid on day one. That is what being positioned for a move instead of a direction looks like.

Andrew Giovinazzi