Price action in the US options market on Monday suggested investors and traders were braced for the S&P 500 index to fluctuate by as much as 2.5% either way in the wake of Tuesday’s consumer price inflation Report, Reuters reported, citing data from options market-making firm Optimum.

Tom Borgen DavisHead of Equity Research Optimum “Because the October CPI read sparked such an outsized positive reaction, the market is implying potentially even greater downside if inflation comes in significantly higher than expected,” the report reads.

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Wall Street’s main indices closed over 1% higher on Monday after last week’s subdued performance. Markets are expected to see a significant bout of volatility over the next two days as inflation data is released and the Federal Reserve meeting is expected. The S&P 500 closed up 1.43% on Monday.

That SPDR S&P 500 ETF Trust SPY closed up 1.44% on Monday, during the Vanguard Total Bond Market Index Fund ETF BND closed apartment.

Option prices immediately estimate a 1.8% swing in either direction for the S&P 500 index following Wednesday’s FOMC decision, the report said, citing Optiver data. Friday is also the last monthly options expiration for the year, which can cause a surge in trading volume from traders looking to replace a large number of expiring contracts.

Expert Take: Brent Kochuba, Founder of options analysis service SpotGammafor now, stated that option positioning is “very balanced between calls and puts,” which the report says gives little indication of where traders expect markets to swing.

“The direction of this movement depends on the Fed,” Kochuba said.

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