Fed Watch

March 19, 2025

Watching the market reaction to Federal Reserve comments

Is a prime opportunity for options traders because of the typically sharp, immediate price movements that follow these statements. Fed comments often signal shifts in monetary policy, influencing interest rates, inflation expectations, and economic growth outlooks, which can rapidly affect stocks and option prices.

Options traders can capitalize on this volatility by positioning themselves in advance of anticipated announcements, using The Options Hunter strategies to profit from price swings—whether bullish or bearish potentially.

Rapid market reactions provide a unique window for options traders to enter and exit positions quickly, often with significant profit potential.

Fed Day January 2024: Quantitative Easing Resumption

In January 2024, the Federal Reserve announced the resumption of quantitative easing (QE) measures, committing to purchasing $500 billion in government securities over the next six months.

This unexpected move was aimed at providing additional liquidity to the financial system and supporting economic growth. The market reaction was immediate.

The S&P 500 jumped by 3.5% on the day of the announcement, while the Dow Jones Industrial Average and NASDAQ Composite rose by 3.2% and 4.1%, respectively.

Fed Day May 2024: Hawkish Stance Despite Slowing Growth

In May 2024, the Federal Reserve's decision to maintain a hawkish stance despite evidence of slowing economic growth led to significant market turbulence.

The Fed signaled its intention to continue with rate hikes to combat still-elevated inflation, surprising many who had texpected a more dovish approach.

The S&P 500 dropped by 2.8% following the announcement.

Here's the setups we look for

While there's no guarantee we'll see the setups that we know yield the best returns, this is an opportunity to join the master divergent trader, Dale Wheatley for what may be a pivotal day.