Excell with Options: Navigating Fed Funds Using Ratio Spreads ahead of Sept. FOMC Meeting

• CME FedWatch Tool, absolute and cumulative probabilities
• Citi Economic Surprise Index vs. the generic 3 future for Fed Funds
• Citi Economic Surprise Index, Non-farm payrolls and Conference Board jobs plentiful vs. jobs hard to get
• Bloomberg Financial Conditions Index vs. the generic third Fed Funds future
• Expected return of a November 95.3125 / 95 1 by 2 put spread

U.S. labor data plays a pivotal role in shaping the Fed’s policy on interest rates, and traders may find it useful to know how the latest jobs numbers could influence the pricing of rate cuts. In this report, Rich Excell looks at asymmetrical risk-reward opportunities through the use of ratio spreads and Fed Funds as the September FOMC meeting looms large on the calendar.