On September 16, 2026 the Federal Reserve raised its target rate by a quarter point to 3.75%–4.00%, on a 12–0 vote. The next decision comes on October 28. Between January 2021 and September 2026, the S&P 500 moved an average of 0.97% on Fed decision days, about a third more than on an ordinary day, and almost as much again the day after. Options know this in advance and price it in. If implied volatility is new to you, start with what vega is.
How much does the stock market move on Fed days?
Since 2021 the S&P 500 has moved 0.97% on the average FOMC decision day, compared with 0.74% across all trading days. The median gap is wider: 0.80% against 0.55%.
Two details matter more than the headline. First, the day after the decision averaged 0.95%, almost as much as Fed day itself. Markets often take the statement one way at 2:00 p.m., reverse during the press conference at 2:30, and settle the next morning. Measured from the close before the decision to the close after it, the average two-day move was 1.31%. Second, with the VIX at 15.01 on October 6, the implied move for an ordinary day was about 0.95%, roughly what an average Fed day has delivered. In other words, the index wasn’t pricing anything special for October 28 a month out; the event premium shows up in the expiries closest to the meeting as it nears.
Does every Fed meeting move markets the same?
No. Fed-day moves depend on how uncertain the policy path is. When the Fed is surprising markets, decision days are violent; when it is predictable, they barely register.
In 2022, as the Fed raised rates from near zero at the fastest pace in four decades, decision days averaged 1.78%, and three of the five largest Fed-day moves in the sample came that year: +2.99% on May 4, 2022, +2.62% on July 27, 2022, and −2.50% on November 2, 2022. The biggest single drop was −2.95% on December 18, 2024, when the Fed cut but signaled fewer cuts ahead. In 2025, a year of well-telegraphed decisions, the average Fed-day move was just 0.36%, less than half a normal day. In 2026, with the Fed hiking again, the average has climbed back to 0.76% through September.
The more the market disagrees about the decision or the path after it, the more the meeting moves prices. A surprise direction change, like a hike after cuts, matters more than the size of the move.
How do you calculate the implied move for an FOMC meeting?
Calculate the implied move from the price of an at-the-money straddle on the first expiry after the decision, divided by the underlying price. That is roughly the move, in either direction, the market expects through that expiry.
Because SPX and SPY have daily expirations, you can isolate the decision day itself. Compare the straddle expiring on the decision day’s close with the one expiring the day before: the difference in implied volatility is the event premium. A simpler cross-check is the VIX rule: VIX ÷ 16 ≈ implied daily move; the expected move guide covers the formula for any horizon.
| Step | Illustrative numbers |
|---|---|
| 1. Index level | SPX at 7,800 |
| 2. Straddle on the decision-day expiry | 7,800 call 42 + 7,800 put 40 = 82 points |
| 3. Implied move | 82 ÷ 7,800 = 1.05% |
| 4. Compare with history | 2021–2026 Fed-day average 0.97%; 2022 average 1.78%; 2025 average 0.36% |
| 5. Decide | Is this meeting more like 2022 or 2025? |
The same arithmetic is used for earnings, covered in straddles and strangles.
What happens to option prices after the Fed decision?
Implied volatility usually drops sharply once the decision and press conference are out, because the uncertainty the options were charging for is gone. This is the IV crush.
For option buyers, it means the move has to beat the implied move just to break even. Buy the 82-point straddle above and a 0.9% move on the day (about 70 points) loses money even though the market moved more than on an average day. For option sellers, it is the source of the edge, but only on the meetings where the move stays inside the range; one 2022-style surprise can wipe out a year of small gains. Vega measures how much each position gains or loses from the drop in implied volatility.
Buying calls the morning of the decision because you expect a dovish surprise. Even if you’re right on direction, you paid for the event premium; a modest rally with an IV crush can leave the call flat or down.
What are the main ways to position options for an FOMC meeting?
There are five main choices, and the right one depends on whether you expect a bigger or smaller move than the market is pricing, and on whether you are trading or protecting a portfolio.
- Long straddle or strangle: profits if the move beats the implied move. Works best when event volatility is cheap relative to uncertainty, as in early 2022.
- Iron condor: profits if the move stays inside your short strikes, and benefits from IV crush. Risk is capped by the wings; see iron condors and IV percentile.
- Calendar spread: sell the expiry just after the decision, buy a later one. Profits from the front-month crush if the index stays near the strike; explained in calendar and diagonal spreads.
- Put spread hedge: for a portfolio, buy a put and sell a lower one. Cheap protection for a hawkish surprise, with the cost known in advance.
- Wait: buy or sell after the decision, when event premium is gone. You miss the move but avoid paying for it.
How should a long-term investor handle Fed week?
A long-term investor should mostly decide in advance whether a hawkish surprise would force a change, and hedge only that. Fed days are a reason to review risk, not to trade.
For someone holding a concentrated, rate-sensitive tech position after a 24-year high in the 10-year yield, a surprise hawkish message on October 28 is a real risk; rising bond yields and stocks explains why. A one-month put spread on that position, bought a week or two before the meeting while the VIX is near 15, costs far less than the same hedge bought after a bad press conference. If the position is collared already, there is nothing to do.
What is the timeline of an FOMC decision day?
The statement is released at 2:00 p.m. Eastern, the Chair’s press conference starts at 2:30 p.m., and minutes follow three weeks later.
| Time (ET) | What happens | What options do |
|---|---|---|
| Before 2:00 p.m. | Quiet; positioning | Event premium at its peak |
| 2:00 p.m. | Statement (and projections in Mar, Jun, Sep, Dec) | First move; implied volatility starts to fall |
| 2:30 p.m. | Press conference | Frequent reversals |
| Next day | Digestion; bond market reaction | Averaged 0.95% since 2021 |
| 3 weeks later | Minutes released | Usually a smaller event |
What is a Fed-week checklist?
- Note the decision date and whether it includes projections (the dot plot).
- Read the implied move from the straddle on the decision-day expiry.
- Compare it with recent Fed-day moves: is this meeting more like 2022 or 2025?
- Decide your view: bigger move, smaller move, or no view.
- For a portfolio, price a put spread on your most rate-sensitive exposure a week ahead.
- Avoid adding long options on the morning of the decision unless the implied move looks clearly too small.
- Wait for the next session before judging the reaction.
Frequently asked questions
How much does the stock market move on Fed days?
From January 2021 to September 2026, the S&P 500 moved an average of 0.97% on FOMC decision days, compared with 0.74% on all trading days, about 30% more. The median Fed-day move was 0.80% against 0.55%. The day after the decision averaged 0.95%, so the reaction often continues.
What is the implied move for an FOMC meeting?
It is the move options are pricing for the decision, usually estimated from the price of an at-the-money straddle that expires just after the announcement, divided by the stock or index price. For the S&P 500 as a whole, VIX ÷ 16 gives the implied one-day move: about 0.95% at a VIX of 15.
What is IV crush after an FOMC meeting?
IV crush is the drop in implied volatility once a scheduled event has passed. Before the decision, options on near expiries carry extra event premium. After the statement and press conference, that premium disappears, so option buyers can lose money even when the market moves, if it moves less than was priced.
Is it better to buy or sell options before the Fed?
Buy when the implied move looks small relative to the uncertainty, as in 2022 when Fed days averaged 1.8% moves. Sell, with defined risk, when the implied move looks generous relative to a predictable decision, as in 2025 when Fed days averaged under 0.4%. Neither works every time.
When does the market react to the FOMC decision?
The statement is released at 2:00 p.m. Eastern and the Chair’s press conference starts at 2:30 p.m. The first reaction often reverses during the press conference, and the full move frequently isn’t clear until the next session.
When is the next FOMC meeting?
The next FOMC meeting is October 27–28, 2026, with the decision on October 28. The following meeting is December 8–9, 2026, which includes a Summary of Economic Projections. The Fed raised rates by a quarter point on September 16, 2026.
Key takeaways
- Since 2021 the S&P 500 has moved 0.97% on Fed decision days against 0.74% on all days.
- The day after a decision moves almost as much (0.95%), so the reaction isn’t over at the close.
- Fed-day moves depend on the regime: 1.8% in 2022’s hiking cycle, 0.36% in 2025.
- Options price the meeting in advance, so you only make money if the move differs from what’s priced.
- Implied volatility usually drops after the decision; long straddles need a move bigger than the implied one.
- For a portfolio, the cheapest Fed-week decision is often a small put spread hedge bought before the event.
Sources and method
- Federal Reserve, FOMC meeting calendars — meeting dates 2021–2027
- Federal Reserve, FOMC statement, September 16, 2026 — 25bp hike to 3.75%–4.00%
- S&P 500 via FRED (SP500) — daily closes used for Fed-day moves
- Cboe Volatility Index via FRED (VIXCLS) — 15.01 on October 6, 2026
- Cboe, SPX options — daily expirations, European exercise, cash settlement
- FINRA, Options — options risks and basics
Fed-day moves are close-to-close S&P 500 price changes on the final day of the 46 scheduled FOMC meetings from January 2021 to September 2026, from FRED’s SP500 series (downloaded October 7, 2026); unscheduled actions and notation votes are excluded. The two-day move runs from the close before the decision to the close after. Straddle examples are illustrative; real event pricing varies by expiry and strike.