Should I adjust position size before Fed Interest Rate Decision?
VixShield Answer
Before a Fed interest rate decision, reduce your iron condor position size by 40-60%. High-impact events like FOMC announcements create sharp VIX spikes that expand implied volatility across SPX, directly threatening your short strikes and compressing your probability of profit.
Under the ALVH methodology, maintain strict wing-width discipline: keep your condor wings at 1.5 to 2.0 times your credit received. When VIX is elevated or expected to rise above 18 ahead of Fed, tighten this to 1.2-1.5x credit to preserve defined risk. Smaller size combined with narrower wings limits the damage from gap moves that often exceed 1.5% in the first 30 minutes post-announcement.
Position sizing is your primary defense, not adjustments after the fact. Enter the event with no more than 1-2% of portfolio risk allocated per condor. If VIX is already trading above 20, cut size further to 0.5% max risk. This preserves capital for higher edge setups that appear after the volatility crush.
Trade the post-Fed reaction instead of through it. Scale back, stay flat, then redeploy once VIX settles.
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