Traders bet on wild swings with CPI prints

New York: As Wall Street’s summer draws to a close, all eyes are on this week’s consumer price report, which traders hope will give the Federal Reserve the ammunition it needs to start cutting interest rates at its next meeting in September.

But for now, the bet is for more volatility.

Some wild swings last week brought the Cboe volatility index, or VIX, which measures the magnitude of price moves in the S&P 500 index, to levels not seen since the height of the pandemic in 2020. Put and call options based on at-the-money prices Traders are positioning for the S&P 500 to advance 1.2% in either direction when the consumer price index report is released on Wednesday, according to Citigroup Inc.

If those prices hold through late Tuesday, they would roughly coincide with an implied move on Aug. 23, when chair Jerome Powell is expected to make remarks at the Jackson Hole Economic Symposium, and on Aug. 29, the day after Nvidia’s earnings report.

“The options market is not sending a very clear signal to stocks yet,” said Rocky Fishman, founder of derivatives analytical firm Asym 500. “When volatility is high, that’s historically a good time to buy equities, but to some extent. It’s already happened, so CPI will be an important catalyst.”