The FOMC Volatility Premium: Evidence from 1-Day Nasdaq-100 Straddles

The article examines Nasdaq-100 one-day ATM straddles around recent FOMC meetings and finds that implied volatility has often been overpriced relative to realized moves. Over the last 12 FOMC announcements, the average Nasdaq-100 move was about +/-0.75%, below the broader 1-day average of +/-0.97%, helping short straddle sellers profit in most cases. A consistent seller of the 1-day NDX ATM straddle would have made 450.04 points overall. However, the piece stresses that rare outlier events can be painful, citing the December 2024 FOMC move when the straddle priced at 187.40 the day before settled at 790.69, and a March 2026 downside move that also hurt short-vol positions. The main takeaway is that short-vol strategies around FOMC can work, but only with disciplined risk management because occasional large market reactions can erase many small gains.