“Despite the first signs of stabilizing stocks on Monday, Powell-speak may still be interpreted cautiously as investors did throughout the Chair’s first uncomfortable year in office, before becoming more at ease after the exercise of the ‘Powell Pivot Put’ in January 2019,” Emanuel continued. “Given the steep skew (expensive downside puts, relatively inexpensive upside calls) investors wishing to gain exposure to the S&P 500 while factoring in the potential for sustained elevated volatility could go long the June 30 4,740 call/3,670 put risk Reversal (buy call, sell put). While 2022 is unlikely to be an average year by most measures, the Fed is likely to ‘exercise the Fed put’ should the average -23.8% strike price come into view.”
