CPI/FOMC Weeks: Charm Decay, Vol Crush, and the Post-Event Play

TL;DR

• Macro weeks (CPI/FOMC) front-load implied volatility—then often crush it post-release.
• Vanna can turn that vol crush into a directional tailwind; charm shapes the intraday path into the close.
• Use a two-phase plan: pre-event risk control → post-event drift exploitation, guided by GEX, IV regime, and time-of-day.

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Table of contents

• Event anatomy in three phases
• Pre-event risk control: Don’t fight the premium
• Post-event: Vol crush, vanna impulse, and drift
• Charm-driven intraday timing
• Execution checklist (printable)
• Case study template
• Failure modes (what breaks the script)
• FAQs

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Event anatomy in three phases

Phase 1 — Pricing the risk (Mon–Event):
IV rises into the print; GEX maps can shift as traders crowd round numbers for hedging. Expect mixed tape and fake-outs as the market repositions.

Phase 2 — The release (08:30 ET CPI / 14:00 ET FOMC, presser at 14:30):
If outcomes land close to consensus, IV typically deflates rapidly. If there’s a surprise, IV can expand and overwhelm pinning.

Phase 3 — The aftermath (T+0 to T+2):
With IV lower, vanna often supports drift in the prevailing direction; pinning can re-emerge around new GEX clusters as positions reset.

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Pre-event risk control: Don’t fight the premium

When IV is elevated, price action is more fragile. Focus on:

• Sizing down and using time stops into the print.
• Avoiding hero trades in the last hour before the release.
• Mapping GEX clusters to know where pinning might resume after the number.
• Tracking term structure/skew; reactive skew changes can preview how vanna propagates post-print.

Goal: Arrive at the event liquid, informed, and unexposed to surprise IV expansion.

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Post-event: Vol crush, vanna impulse, and drift

If IV falls (“vol crush”):

• For call-heavy books, positive vanna can lift deltas → dealers reduce long-futures hedges → supportive drift in spot.
• Expect cleaner trends when GEX is neutral to positive and macro is behind you.

If IV rises (surprise):

• Vanna impulse can flip; negative/declining GEX favors range expansion and failed pins.
• Treat early counter-trend bounces as suspect until IV stabilizes.

T+1/T+2:

• New GEX clusters form; if IV stays subdued, continuation drift is common into the next catalyst.

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Charm-driven intraday timing

• Late morning (10:30–12:00 ET): First re-hedge wave. If the initial direction holds with falling/steady IV, continuation odds improve.
• Power hour (15:00–16:00 ET): Charm accelerates delta decay. Expect pinning near heavy strikes or a final push if IV keeps bleeding.

Use time-aware entries/exits, not just price levels.

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Execution checklist (printable)

Before the print:

• Log consensus and whisper numbers; note surprise bands.
• Capture IV term and skew; set an expectation (crush vs expansion).
• Mark GEX clusters and the nearest magnet strikes.
• Decide max size and time stops (flatten x minutes before release).

After the print (first 30–60 min):

• Re-assess IV regime (down/flat/up).
• Check tape character vs GEX (pinning vs expansion).
• If vol down + neutral/positive GEX, plan continuation entries on pullbacks.
• If vol up + negative GEX, tighten risk; look for momentum alignment.

Into the close / next day:

• Track charm windows for either reversion to magnets or trend extension.
• Rebuild GEX for tomorrow; identify fresh clusters.
• Journal: snapshot IV/GEX/vanna readings and execution notes.

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Case study template

Event: [CPI or FOMC], [YYYY-MM-DD]
Pre-print: IV elevated; GEX clustered at [strike(s)].
Print: [Inline with/Above/Below consensus], initial move [up/down].
Post-print: IV [falls/rises]; vanna [supports/opposes]; GEX [neutral/pos/neg].
Outcome: [Drift/Pin/Expansion]; best entries were [pullbacks/breakouts/time-of-day].
Lessons: [What worked], [what failed], [rule(s) to update].

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Failure modes (what breaks the script)

• Large surprise → persistent IV expansion; vanna tailwind absent; expect two-way risk.
• Negative or falling GEX → pinning unreliable; wider ranges.
• Liquidity air-pockets around single-name heavyweights during index events → map single-name OI too.
• Back-to-back catalysts (CPI → FOMC same week) → whipsaw risk between phases.

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FAQs

Why does vol crush happen after CPI/FOMC?

Markets price uncertainty before the print. Once resolved, that uncertainty decays, pushing IV lower, often independently of spot direction.

Can I use this without trading options?

Yes. Treat vanna/charm/GEX as context for spot/futures execution—bias, timing, and risk—not as a stand-alone signal.

What if CPI surprises but IV still falls?

It can happen when positioning was too conservative. Follow the actual IV path and GEX response rather than the headline alone.

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