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The effect of interest rates on options trading  

5 December 2007

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Since the recent November 50 basis point cut in official interest rates by the Federal Reserve in the USA the options markets have range traded very nicely and options trading has been excellent. With a further announcement on interest due by Ben Bernanke (Fed Chairman) on December 11 there has been speculation on the three choices on Interest Rates: No cut, 25 basis points cut, or a 50 basis points cut. Whatever the decision is - the futures market is sure to react and the movement in the indices will provide us opportunities to set new options trades with a pleasing variety of strike prices in our spreads.

December 5th, 2007: The Reserve Bank in Australia chose to hold rates unchanged.

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