One hour before the open this morning, the market got to digest consumer price index (CPI) numbers, along with building permits and housing starts. All of the numbers came in lower than expected. Notice I do not say worse than expected, because is it bad that consumer prices are declining?

In the long term, yes, but in the near term, we don't have stagflation. Thanks to the decline in oil and other commodity prices, many analysts like to point out that it is like a tax rebate for Americans because they'll spend less on gasoline and groceries.

The other benefit of lower-than-expected numbers is that it allows the

Federal Reserve

to keep lowering the fed funds target. And lower it is what the market expects to happen today at 2:15 p.m. EST. The current target rate is 1%, but the effective rate at the window has been very volatile, and actually well below 1% for weeks now. All the same, investors are expecting at least a 50-basis-point cut, to 0.50%.

On the options front, a good measure of what the equity market is waiting for is the December at-the-money straddle in the


(SPY) - Get Report

. In early trade this morning, the December 89 straddle is trading for $4.43, with the stock at $88.75. That means that between now and Friday's close (expiration) sellers of that straddle expect the SPY to be within plus or minus 5% of 89.

Elsewhere in option land this morning, we have already seen a big seller of the



January 2009 12.5 puts for 30 cents with the stock at $16.35. This type of selling might be déjà vu all over again after what we saw yesterday: a customer selling out of the money puts in January on five to 10 names. A bullish stance, but not overly bullish as the upside income is limited to the proceeds from the puts.

So, for now we wait for 2:15 p.m. EST and what the Fed has to say. I look for below-average volume until we get that event out of the way. After the number is out, look for active trading as investors start to position their portfolios with the knowledge of what Chairman Bernanke and company have to say.

Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of Options Alerts. Click here for a free trial for Options Alerts. Pyle writes regularly about options investing for

Jud Pyle is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."