Business & Finance
Options Market Challenges Futures Aggressive Fed Hike Bets
Key Points
Options Market Challenges Futures Aggressive Fed Hike Bets Options traders are building up bets that the broader market overreacted to the Federal Reserve’s hawkish pivot when it priced in a series of interest-rate hikes in the US starting later this year. Trading volumes in contracts linked to the Secured Overnight Financing Rate, which closely tracks Fed policy expectations, doubled in the day after the Fed’s June rate decision last week. Many of those wagers targeted the possibility of...
Options Market Challenges Futures Aggressive Fed Hike Bets
Options traders are building up bets that the broader market overreacted to the Federal Reserve’s hawkish pivot when it priced in a series of interest-rate hikes in the US starting later this year.
Trading volumes in contracts linked to the Secured Overnight Financing Rate, which closely tracks Fed policy expectations, doubled in the day after the Fed’s June rate decision last week. Many of those wagers targeted the possibility of fewer rate hikes than seen in broader money markets, which had priced in a high likelihood that Chairman Kevin Warsh would usher in an era of elevated borrowing costs.