Inventory, WASDE, FOMC, and Prints

Event implied move as a sizing input.

Intermediate 5 min read Course 27 of 60

Course 27 of 60 in the futures hub. This one covers the scheduled reports that move futures markets, and how to decide what to do before each one.

Reports are on the calendar

Scheduled reports move futures, and every one of them is on a calendar weeks ahead. That means the move itself may surprise you, but the timing never should. The traders who get hurt usually knew the report was coming and decided to "see what happens" with a position sized for a normal hour.

Another common one: fading the number because "it's priced in," with no dollar limit on being wrong. Currency traders have their own report calendar, and the forex course covers it.

1. Which reports matter for which market

Stock index futures react most to inflation data, the monthly jobs report and Federal Reserve decisions; the Fed's policy committee holds eight regularly scheduled meetings a year. Energy reacts to the weekly EIA reports, oil on Wednesday and natural gas on Thursday. Grains react to the USDA's monthly supply and demand report, known as WASDE. Interest rate futures react to the Fed and to inflation.

Put the reports for your markets on a weekly sheet with the time in your own time zone. Then check what a position ties up in margin, because exchanges and brokers can raise margin around big events. The margin calculator shows the cash involved.

The print is a sizing input. Name it by root ComplexUsual printsClockDefaultIndexCPI / FOMC / NFPRTH + ETHflatten or haircutEnergyEIA / API-ishmidweekstop > impliedAgsWASDE / stockscalendarlimits existRatesFOMC / CPImeeting daymargin jumps

2. Compare the expected move with your stop

Options prices give a rough idea of how far the market expects price to move on a report. You can read it from the price of an at-the-money straddle that expires just after the event. Then compare that expected move with your stop:

Expected move 40 ticks, your stop 12 ticks: the stop sits inside normal noise for that report. Sizing for 40 ticks on ES means 40 × $12.50 = $500 per contract against your limit, or be flat.

If the expected move is bigger than your stop, the stop will probably get hit for reasons unrelated to your idea. You have three honest choices: size for the expected move, cut size a lot, or be flat. Holding a normal-size position with a normal stop is the one choice that doesn't make sense. Do the math with the risk calculator before the report, not during it.

If implied move > your stop, you are gambling the print pass if implied ticks > stop ticks Straddle as a tell options imply a range Your trail must be larger than that range Or you flatten flattening is a position After the print a new trade — new ticket

3. Reading the straddle

A straddle is a call and a put at the same strike. Its price is roughly what the market is paying for movement in either direction. Before a big report that price rises; afterward it usually drops quickly, because the uncertainty is gone.

You don't need to trade options to use this. Just look at the price, turn it into ticks of the future, and write the number on your report sheet. It isn't a forecast of direction, and it's sometimes wrong in size too. As a gauge of how wild the hour might get, it beats guessing. The free calculators help with the tick conversion.

4. Hold or flatten: decide ahead

Write a policy for each report before the week starts: flat, reduced, or held with a stop sized for the move. Then follow it when the time comes. Deciding in the last minute, with a position already on, is how people end up holding through things they never meant to.

A simple default works for most people: flat into the reports that matter for your market, unless the plan says otherwise. That's a perfectly good position.

Is the implied move larger than the stop you wrote? implied > stop? Flatten / skip policy fires Hold only if sized for the implied

5. After the number comes out

Treat anything after the report as a new trade with a new ticket. Spreads can be wide for the first minute or two, and the first move sometimes reverses. Waiting a few minutes for prices to settle costs you little and saves you from the worst fills.

If you're already in the market from before the report, judge the position on what it looks like now rather than what you hoped. The cash open in stock index futures has its own rhythm, covered in the opening range lesson.

6. Common report mistakes

Holding a normal-size position through a big report. Fading the first move with no stop. Forgetting a holiday shifted the report's day. Market-ordering in the first seconds when spreads are widest.

Report times and margin rules can change, so check the official calendars each week. The next lesson covers spread strategies, a different way to trade around events.

Building the weekly report sheet

Every Sunday, list the week's reports for your markets with the day, the time and your policy beside each. For an energy trader that might be Wednesday 10:30 a.m. Eastern for oil and Thursday 10:30 a.m. for gas, plus any Fed decision or inflation report that week.

Add the expected move in ticks where you can find it, and your size for that day. Then keep the sheet next to the screen. It turns a surprise into an item on a list, which is about the best you can do with scheduled risk.

Before a report

  • Every major report is scheduled; know the time in your time zone.
  • If the expected move is bigger than your stop, change the size or be flat.
  • Decide your policy for each report before the week starts.
  • Treat anything after the number as a new trade.

The calendar is public weeks ahead. Look at it on Sunday. Educational only. Not a recommendation to buy, sell, or hold any contract or pair.