Into an FOMC decision, uncertainty is high, so implied volatility gets bid up and option premiums richen. The instant the decision lands and uncertainty resolves, that premium is no longer justified — and the resulting vol crush can set off a familiar chain reaction.

Crush, then bounce

As IV collapses after the announcement, vanna kicks in: falling volatility shrinks the delta of dealers' short puts, leaving them under-hedged, so they buy the underlying to rebalance. That mechanical buying is the “vanna bounce” — the grind higher that so often follows the initial post-Fed whipsaw, even when the news wasn't obviously bullish. The crush and the bounce are two links of one hedging chain.

The post-Fed grind up is frequently the vol crush cashing out as a vanna bid — not the market re-reading the statement as dovish.

Why the first move fools people

The immediate reaction to a Fed statement is often a violent two-way whipsaw as the gamma map repositions. Traders who read that first spike as direction get run over when the vanna bid reasserts itself minutes later. The honest read is to wait for the vol to settle and see whether the crush-and-bounce sequence takes hold.

How to trade it

Respect the sequence: expect a whippy first few minutes, then watch VIX — a decisive crush lower is the setup for a vanna grind, so fading that grind fights a mechanical bid. The tailwind lasts as long as vol keeps falling; when IV stabilizes, the vanna support fades. As always, it's context on top of the live dealer read, not a standalone signal.