Rate Decisions Are Coming — My Fed Week Strategy Explained
Trading Ideas, Market Outlook, and Tactical Moves for the Week
Hello Pulsers,
This week, all eyes are on the Fed as we await its interest rate decision. The focus is on where the Fed funds rate may head over the next 6 to 12 months—and how we can position ourselves accordingly.
In this issue, I’ll break down a trade setup involving Fed funds futures and share strategies for hedging your portfolio against tail risk events.
🔍In This Issue
Here’s what I’m covering:
The U.S. dollar is selling off despite elevated rates.
How to hedge your portfolio against tail risks using options.
My current trade setups and positioning for the week.
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📊On Markets
The U.S. dollar is showing clear signs of weakness, even as overnight rates and the long end of the yield curve remain elevated. The chart below highlights the growing divergence between the USD and 10-year yields—a sign that the dollar is losing strength.
What’s driving this? Uncertainty around U.S. fiscal policy, including concerns about recent spending bills, is contributing to the dollar’s decline.
This Wednesday, the Fed will announce its latest interest rate decision. Markets are pricing in another pause.
While I agree that a rate cut is unlikely, I believe this meeting will have a distinctly dovish tone, which could finally move Fed funds futures. I plan to express this view by going long on rate futures contracts.
Interestingly, the options market (via at-the-money straddles) is pricing in a 2.2% move this week—much higher than the historical average of 1%.
If you’re looking to hedge your portfolio’s downside over the next year, consider buying out-of-the-money puts. For example, $560 puts are currently trading around $18.50—letting you protect against a drop below $560 for roughly 3% of notional value.
All the following analytics are given by $IBKR. If you are not yet on Interactive Broker, make sure to sign up using the link below:
💼On Positions
Here’s how I’m positioned this week:
✅ Selling covered calls
I hold over 1,000 shares of $SPY in my portfolio. I’m selling covered calls with a 0.25 delta (August 29, 2025 expiry, .22 delta, strike $634) at $4.50 per contract. I’ve sold 4 contracts so far (close to ~$2k USD) and plan to take profits after about 65% premium decay. This helps hedge my position while generating income, especially in what I expect to be a range-bound market.
✅ Adding TLT selectively:
I’m adding to my TLT position strategically as opportunities arise. I continue to believe that the long end of the curve is too high and the 10-year should trade closer to 4%, leading TLT 0.00%↑ to rally closer to $95/sh. I continue to be patient with this trade.
✅ Strategic options trades on earnings:
Continuing to deploy my options playbook for earnings season setups. Follow my twitter if you like to stay up to date with my live trades
👉 Follow the trades along here: https://bit.ly/3KPN2lJ
Last Words
As many of you have seen, most of the charts and analyses I use are from Interactive Brokers. Interactive Brokers provides some of the best commission structures, yields on idle cash, and, more importantly, one of the best tools for active trading. As an active options trader, I can only imagine myself trading with the tools that they have provided.
If you are still deciding, check out their free simulator and everything else they provide to help you get started.
Below are the links to help you get started.
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Disclaimer
The opinions provided in this newsletter are mine and mine only and do not represent any firm or other affiliation.
You understand that NO content published and discussed during this newsletter constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.
You further understand that I will NOT advise you personally concerning the nature, potential, value or suitability of any particular investment, security, portfolio of securities, transaction, investment strategy or other matter.
This presentation and the content provided are for educational purposes only.
Hey Ardi - how did the trade go?
Great read Ardi - keep us posted on the result of these positions