The FOMC Volatility Premium: Evidence from 1-Day Nasdaq-100 Straddles

This Wednesday brings the first FOMC meeting with Kevin Warsh at the helm, and markets price in only a 3.7% chance of a rate hike. The analysis tracks Nasdaq-100 ATM option prices around the last twelve FOMC announcements, noting an average one-day move of about plus or minus 0.75%. That level has trended lower recently, and the ATM straddle has tended to be overpriced in ten of the twelve events. A common outcome for consistent sellers has been a net gain of roughly 450 points from selling these straddles across cycles. Historical outliers include December 2024, when the NDX fell and the pre-announcement straddle swung from 187.40 to 790.69, a move that would erase substantial profits.