BlockBeats News: On January 14, an increasing number of options traders are ruling out expectations for a Federal Reserve rate cut in 2026, instead betting that the Fed will keep interest rates unchanged throughout the year. This trend can be traced back at least to last Friday, when U.S. employment data showed an unexpected drop in the unemployment rate. Based on market pricing, this effectively eliminated the possibility of a Fed rate cut this month and prompted more traders to delay their expectations for future rate cuts in the coming months. David Robin, an interest rate strategist at TJM Institutional Services, noted, "From a data perspective, the probability of the Fed keeping rates unchanged at least until March has increased, and as each meeting passes, the likelihood of rate stability continues to grow." Recent options flows for the Secured Overnight Financing Rate (SOFR), closely linked to the Fed's short-term benchmark interest rate, have also signaled a more hawkish outlook.
Newly established options positions are mainly concentrated in the March and June contracts, hedging against the scenario of further delays in the Fed's next rate cut. Other positions in more distant contracts are expected to benefit from the Fed maintaining interest rates unchanged throughout the year. Robin stated that regardless of whether the market believes the Fed will keep rates steady, the cost of these trades is low. As a prudent risk manager, you would want to hold such positions. (Gold10)