FX: Powell's appearance time is finalized! It is expected to reveal major monetary policy measures, beware of the storm of position adjustment tonight

The Federal Reserve's calendar shows that,Federal Reserve Chairperson Jerome Powell will deliver a speech on the economic outlook at the annual meeting of central bankers in Jackson Hole, Wyoming, on August 25, which is scheduled to begin at 10:05 a.m. ET (10:05 p.m. Beijing time).。

The Jackson Hole annual meeting of global central banks is often a window for the Federal Reserve to signal important junctures in monetary policy, and Powell will have the opportunity to present his latest views on whether further policy tightening is needed to reduce inflation amid unexpectedly strong economic growth, or whether sufficient progress has been made to contain inflation to keep interest rates stable.

The Fed's July meeting notes that policymakers still see significant risks to inflation that could be higher than expected, which could require further rate hikes, although some officials prefer to keep rates on hold and warn of the risks of keeping policy too tight as inflation falls.

Data since the July meeting showed that price pressures continued to cool, even as the labour market and consumer spending remained strong. Mr. Powell told reporters last month that the Fed would make its rate decisions meeting by meeting, but stressed that officials intended to "keep policy restrictive until we are confident that inflation is sustainably coming down to our 2 per cent objective, and we are prepared to tighten further if appropriate".

Is it time to hedge before the Jackson Hole annual meeting?

Rocky Fishman, founder of Asym 500, a derivatives analytics firm, estimates that about $2.20 trillion worth of longer-term options tied to stocks and indices expire on Friday. Investors must decide whether to roll over options or take new positions - a process that can cause trading volumes to spike and can lead to sudden price swings.

The OpEx event comes at a crucial moment as the S & P 500's huge rally this year begins to take a hit and investors bet that a strong US economy will force the Federal Reserve to raise interest rates further.

While option expiration events typically provide a window of liquidity for those looking to shuffle large positions, they also add another complication to volatile equity markets - which are prone to intraday sell-offs and frequent reversals. In addition, the bigger challenge for traders is the current flood of zero-day options (0DTE), as well as recent shifts in market makers' positions.

Predicting the outcome of OpEx is futile. But recent history shows that US stocks tend to rise after OpEx events. Since the beginning of last year, the S & P 500 has risen all but six times in the week following OpEx, according to data collected by foreign media.

But according to Brent Kochuba, founder of analytics service SpotGamma,Listening to this pattern could be dangerous ahead of the annual policy forum in Jackson Hole.Given the current low cost of options, he advises investors to consider buying protection. He said:

"OpEx will unleash some directional volatility and next week's Jackson Hole meeting will be a catalyst. It is a reasonable time to hedge some longer-term puts as implied volatility has not yet responded to the S & P 500 decline."

The S & P 500 fell for a third straight session as global bond yields soared. The index fell nearly 5% in August and is on track for its worst monthly performance of 2023.

One category of market participants to watch - funds that buy and sell options as part of their investment strategy and rebalance their positions on a monthly basis, such as the Global X Nasdaq 100 Covered Call ETF (QYLD) - can add a layer of uncertainty to traders when they open positions around the third Friday of the month.

For investors who use derivatives more cautiously, it may be difficult to make allocation decisions this time around. The S & P 500 fell for a third week in a row as this year's darling technology stocks fell to the bottom of the August rankings,Pressure to hedge losses is buildingIn fact, the recent trading behavior of zero-day optionsTend to put options。

However, earnings forecasts are starting to rise as stronger-than-expected economic data have helped make it reasonable to think the correction could be short-lived, according to JPMorgan's trading desk.

FXTForex expects U.S. stocks to reach all-time highs after experiencing recent turbulence that could be driven by seasonal weakness and Federal Reserve policy uncertainty.

Equally controversial are market makers, who are on the other side of options trading and must buy and sell stocks to balance their risk exposure. Goldman Sachs said last week that this group had switched to "gamma short" positions for the first time this year, and that their activities could amplify market volatility. 

Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets, said:Since Jackson Hole could become a volatile event, any stock market correction could quickly deteriorate given traders' stanceShe said:

"There's a lot of talk that the market is moving from'long 'to'short'. That means that as we sell stocks, we're reaching more put buyers than put sellers. Put buyers tend to exacerbate negative moves as traders sell stocks."