Ahead of Fed's interest rate decision, here's how derivative analysts are positioning the market

The US Federal Reserve is scheduled to release its monetary policy decision today. Amid sticky inflation, market analysts predict that the Fed will maintain the current 'federal funds rate' target range of 5.25 – 5.5 percent. However, since there has been no change in interest rates by the Federal Reserve since July 2023, many investors speculate that a rate reduction could be on the horizon.

Benchmark indices are trading choppy today. Here's how traders in the derivatives segment are positioning themselves ahead of the Fed Meeting:

Akshay Bhagwat, Senior Vice president derivative research at JM financial noted that markets have lately been under selling pressure with mid- and small-caps taking the major brunt of selling pressure. "Nifty broke the 21,900 support yesterday, but ahead of FED policy tonight slight unwinding of short bets is leading to relief recovery in day trades."

"Across options matrix Highest open interest (OI) in CE writing at 22,000 offers strong resistance. A cool off in VIX with PE writing addition at 21,700 hints a support base building up at 21,700 for the 21 March weekly expiry. Although relief recovery can see a day trading pullback prices should sustain above 21,975 for any bullish reversal scenario, " added Bhagwat.