How FOMC Meetings Impact 0DTE Options

The Mechanics of FOMC Days

Federal Open Market Committee (FOMC) days are arguably the most important macro events for 0DTE options traders. These days consist of two distinct volatility events:

1. 2:00 PM EST: The release of the interest rate decision and the policy statement.
2. 2:30 PM EST: The beginning of the Fed Chair’s live press conference.

Implied Volatility Pricing

Because the exact timing of the market-moving news is known in advance, market makers price 0DTE options differently on FOMC days compared to standard trading days.

The Morning Volatility Premium

On a normal day, 0DTE options experience rapid Theta decay (loss of value due to time) throughout the morning.

On an FOMC day, 0DTE options maintain artificially high premiums throughout the morning. Market makers refuse to lower prices because they know the massive risk event is arriving at 2:00 PM. A trader who buys a straddle at 10:00 AM on an FOMC day will likely watch their options bleed value very slowly until the release.

The 2:00 PM IV Crush

At exactly 2:00 PM EST, the statement is released. Immediately, the uncertainty of the statement is removed from the market. As a result, Implied Volatility (IV) instantly crushes.

Even if the S&P 500 moves 0.5% in one minute, if you bought a 0DTE call or put right before the release, the instantaneous drop in IV (the “IV Crush”) might completely offset your directional gains, resulting in a net loss on the trade.

The 2:30 PM Reversal Risk

The Fed Chair’s press conference begins at 2:30 PM. Historically, the market frequently reverses its initial 2:00 PM reaction based on the nuance of the Chair’s Q&A session.

For 0DTE options, this creates a violent environment. An option that went from $1.00 to $10.00 at 2:05 PM can easily collapse to $0.05 by 3:00 PM if the Chair says something that reverses the market trend.

Trading Mechanics

Because of the extreme IV pricing and subsequent crush, buying options immediately prior to the 2:00 PM release is statistically a low-probability event. Institutional traders often focus on:

• Selling volatility into the 2:00 PM event to capture the IV crush.
• Waiting until 3:00 PM, after the press conference has established a definitive trend, to trade the remaining hour of the day with normalized volatility.