Implied Volatility Around FOMC and CPI Days: Expected Move and IV Crush, Explained

FOMC & CPI Day: What Happens to IV

Before a scheduled release, option prices often build in a bigger move. After it, implied volatility usually drops. Enter fictional numbers to see the expected move and the before-and-after option value.

Fictional walkthrough

  • Monday: CPI is due Wednesday at 8:30 AM ET. One-week IV on the fund climbs from 17% to 22% as traders buy protection.
  • Wednesday 8:30 AM ET: CPI comes in close to forecasts. The fund opens 0.8% higher.
  • Wednesday close: IV falls back to 16%. The at-the-money straddle loses value even though the fund moved, because the move was smaller than priced in.
  • FOMC days work the same way, with the statement at 2:00 PM ET and the press conference at 2:30 PM ET.

Release dates: BLS CPI schedule · Federal Reserve FOMC calendar