Goldman Sachs analysts told investors in a note Wednesday that they recommend buying options to hedge FOMC-day volatility.
According to the investment bank, there are opportunities in index, ETF, and single stock options.
"SPX options are pricing a +/- 0.7% move for FOMC day, while the SPX has moved an average of +/- 1.2% on the past four FOMC days," analysts explained. "Most recently, the SPX moved -1.6% on the January 31st FOMC announcement."
Current SPX options prices are smaller than 15 of the past 17 FOMC-day moves.
Beyond the index, Goldman Sachs has identified various stocks and ETFs, including Citigroup (C), UPS (UPS), Carnival Corp. (NYSE:CCL), and Axalta Coating Systems (NYSE:AXTA), that have made outsized moves on FOMC announcements over the past two years.
Goldman Sachs economists recently revised their rate cut expectations to three cuts in 2024 (compared to four previously) on the back of a firmer inflation trend. While they expect the policy rate to remain unchanged during the March meeting, they forecast the first cut to happen during the June FOMC meeting.