As investors try to decode the Federal Reserve?s next step, options traders are betting that regardless of what happens, it?ll be a rocky ride for stocks.
Expectations for future price swings have jumped in the past month, with the Chicago Board Options Exchange Volatility Index rising 11 percent since Aug. 22 to 12.73. At the same time, the market has been so calm lately that a gauge of historical volatility is at 5.9, near a three-year low. The ratio between the two measures reached a 19-month high this week, according to data compiled by Bloomberg.
?The market is itchy and anxious about what the Fed will say,? Dan Deming, a managing director at Chicago-based Equity Armor Investments, said in a phone interview. ?Traders and market participants are anticipating some movement here. The times the Fed has tried to rein in liquidity provisions and taken the IV out of the patient, it hasn?t gone too well.?
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