SPY Options Today: Pullback Before FOMC Starts
· 4 min read
SPY closed at $760.88 today, down from $764.29 on Thursday. QQQ closed at $709.18, down from $714.88. Both settled well off their highs — SPY topped out at $763.52 before fading, QQQ hit $712.95 and gave most of it back. Nothing dramatic. A slow bleed into the close on the last full session before the Fed’s two-day meeting starts tomorrow.
I trade SPY options and individual stocks. Six years doing this. Year 1 I lost $11,400 finding out the hard way what a day like today does to an options book. Year 2 I broke even figuring out why. Years 3 through 6 I’ve been profitable, mostly because I stopped treating every red day the same way.
Today isn’t a normal red day. It’s the setup day for a binary-ish two-day window, and that changes how I think about every options position I’m holding into tomorrow morning.
What actually starts tomorrow
The FOMC’s meeting runs Tuesday and Wednesday, September 15 and 16. The rate decision and the updated dot plot land Wednesday at 2:00pm ET, followed by the press conference. Retail Sales data is also due Wednesday morning at 8:30am ET. I don’t have a forecast number for that release in front of me, and I’m not going to invent one — I’d rather tell you I don’t know than make up a figure that sounds authoritative.
What I do know is the shape of the next two days. Tuesday is the Fed’s quiet period in full effect — no speeches, no leaks, just positioning. Wednesday morning brings Retail Sales, then a six-hour wait until the actual decision, dot plot, and press conference all land inside the same ninety minutes. That’s three separate pieces of information — the rate call, the Fed’s own rate-path projections, and Powell’s live commentary — compressed into one afternoon instead of spread across a week.
How IV actually behaves into a day like this
Implied volatility in SPY and QQQ options doesn’t spike on the day of an FOMC decision so much as it builds toward it. Today’s session already showed a piece of that — a slow give-back into the close instead of a sharp reversal, which is what positioning ahead of a known event usually looks like. Over the next two full trading days, expect IV on front-week SPY and QQQ contracts to keep drifting up as market makers price in the uncertainty of Wednesday’s afternoon. That’s not fear, that’s just supply and demand for insurance.
The mechanical effect on any options position I’m already holding: extrinsic value grows even if the underlying doesn’t move much. That sounds like a gift if I’m long premium, but it isn’t free — it’s the market charging more for the same contract because the range of possible outcomes on Wednesday afternoon is wider than usual. Then Wednesday at 2:00pm, once the number and the dot plot are both out and Powell starts talking, that same IV tends to collapse fast — sometimes within the hour — regardless of which way price moves. That’s the vol crush, and it happens whether the decision was a surprise or not.
Position sizing over two days versus one
This is the part that actually costs people money, and it’s the part I got wrong in year 1. A single-release day — a jobs number, a CPI print — gives you one clean resolution point. You size for one gap, one crush, done. A two-day FOMC setup is different because you’re paying rising theta and rising IV for two full sessions before you ever get to the event that resolves the position. Hold a long call or put through Tuesday and into Wednesday morning, and you’re financing two days of time decay just to get a shot at a directional move that only really shows up in the final ninety minutes.
My rule for this specific setup: I size positions I plan to carry through Wednesday’s 2:00pm window meaningfully smaller than I would for a single-day catalyst, because I’m paying for two days of carrying cost, not one. If I want exposure into the decision itself, I’d rather open it closer to Wednesday’s open than sit in it from today, so I’m not burning premium through a quiet period that has no informational content of its own. And I keep the position size honest enough that a normal pre-decision chop — like today’s — doesn’t force me out of a trade that hasn’t even reached its resolution point yet.
What I’m actually doing with today’s close
I’m not reading today’s pullback as a signal about what the Fed will do Wednesday, and I’m not going to pretend I have an edge on that call — nobody does, that’s the whole point of a quiet period. What today tells me is where my levels sit heading into two sessions of rising IV: SPY’s $757.93 low and $763.52 high from today, QQQ’s $702.75 low and $712.95 high. Those are the ranges I’m watching get squeezed as premium builds into Wednesday, and the ranges I expect to snap out of once the crush hits after 2:00pm.
My account runs on Alertsify for execution, which matters more than usual on a setup like this — the two-day carry means more decisions about when to size up, size down, or close ahead of the event, and I’d rather that be handled on rules I’ve already set than on however I’m feeling at 1:55pm Wednesday.
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