To The Moon

All eyes on another sizable rate hike from the Fed this week.

According to CME Fedwatch tool, financial markets have priced in a 80%probability, 75 basis points increase to the target rate on Wednesday,, and the probability of raising interest rates by 100bp is 20%.

Wall Street turned its attention to the final rate of this round of interest rate hikes.According to CME Fedwatch tool, the benchmark interest rate range in March 2023 moved up to 4.25%-4.75%, which is 0.5% up than the market expectation of 3.75%-4.25% before Jackson Hole.

Otherwise, Wall Street also take its cue from Fed Chair Jerome Powell’s speech in the aftermath of the event, along with economic projections of U.S. central bank members and the latest dot plot showing each official’s forecast for the central bank's key short-term interest rate.

Tiger's Call/Put Ratio showed that SPY and QQQ Call/Put Ratio were 0.58 and 0.59, respectively. Due to the uncertain Fed meeting, the investors bet heavily on the PUTs of index-ETF options to hedge their positions. $Invesco QQQ Trust(QQQ)$ $SPDR S&P 500 ETF Trust(SPY)$

At present, there are still a large number of PUTs that may form a downward run again, or the closing of short positions will bring upward pressure.

Whatever the direction, volatility can still be expected to be very high during the week. My QQQ strangle strategy is still valid.

Now look at QQQ's option chain for September and October. There are 60,000 Put contracts with the strike price of $290, expiring on September 30, which is 10 times that of Calls.The PUTs with strike prices of $285 and $295 are 60,000 and 35,000 respectively, which are also many times that of Calls​.

By the next options expiry, $280 represents a very critical position, and the PUTs are as high as 126,000 contracts. If QQQ falls below $280 at that time, forcing Market Makers to sell to hedge, it may run down again. At the strike price of $290, there are 140,000 put options.

Last week, this price was the position in which bulls were disarmed, but once these PUT holders close their positions, they will cause upward short positions.

On the Call side, there are over 10,000 contracts in the strike of $290, and 35,000 contracts in the strike of $300, which are relatively large positions, but they are in no way comparable to 100,000 PUTs.​

Look at SPY option chains.PUTs, which expire on September 30th currently hold 134,000 contracts with a strike of $385, which is five times more than Calls at the same strike price. The same difference occurs at different integer prices.The next monthly contract has a key price of $390, the holding amount for PUTs is 130,000. This is nearly 10 times the call amount, corresponding to the $290 QQQ contract above.