Is Market Expecting Drama on Election Day?

In financial markets, an investor can invest in volatility. Bloomberg points out that the futures contract tied to volatility near Election Day is unusually high. The best explanation is that the market expects fireworks near Election Day. More properly I should say, “the odds” of fireworks are very high.

“In the history of the VIX futures contracts, we’ve never had an event risk command this sort of premium into forward-dated vol at a specific tenor,” Bloomberg macro strategist Cameron Crise wrote in a blog post.

The cliché is that the market hates uncertainty. My guess is that the big fear is an unresolved election. I can’t imagine anyone would enjoy the election descending into rounds of lawsuits that carry on for weeks.

Posted by on September 2nd, 2020 at 2:22 pm


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