US Elections Day Risk Rises as Trump Gains in the Polls

October 21, 2024

Link to Report: Macro Volatility Digest

WHAT STANDS OUT:

• Volatility traders flattened the S&P-500® Index skew following OPEC’s lowered revision for oil demand growth (its 3rd consecutive downward revision), shaving 1 volpt of geopolitical risk premium off of the VIX® Index. Nonetheless, skew remains steep (84th percentile highs) and we estimate that the current VIX® Index level of 18 still embeds a total of 3.5pts of geopolitical risk premium (i.e., if MidEast tensions were to dissipate entirely, VIX would fall to 14.5).
• The US Elections Day premium embedded into Nov 6th vs Nov 5th expiry S&P® options has widened by an additional ¼ point to 2.73 wk/wk as Trump gains in the polls. We believe this direct relationship between elections risk and Trump’s poll gains reflects the possibility of (Jan 6th style) protests if there is a disconnect between the polls and US election outcome.
• The post-Elections volatility premium representing the risk of a contested election, however, has declined on Trump poll gains. Specifically, the length of time accorded to resolve a contested election has shortened by 50% and is now only reflected in the volatility term structure for one-week post-Elections (vs. 2 weeks at the beginning of October).

Chart: US Elections Day Event Risk Higher, Risk of Contested Election Lower on Trump Poll Gains

[Download Full Report Here]

[Subscribe Here]

‌

Disclaimers:

The information provided is for general education and information purposes only. No statement provided should be construed as a recommendation to buy or sell a security, future, financial instrument, investment fund, or other investment product (collectively, a “financial product”), or to provide investment advice.

In particular, the inclusion of a security or other instrument within an index is not a recommendation to buy, sell, or hold that security or any other instrument, nor should it be considered investment advice.

Past performance of an index or financial product is not indicative of future results.

The views expressed herein are those of the author and do not necessarily reflect the views of Cboe Global Markets, Inc. or any of its affiliates.

There are important risks associated with transacting in any of the Cboe Company products or any digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers contained at: https://www.cboe.com/us_disclaimers/

These products and digital assets are complex and are suitable only for sophisticated market participants. In certain jurisdictions, including the United Kingdom, Cboe Digital products are only permitted for investment professionals, certified sophisticated investors, or high net worth corporations and associations.

These products involve the risk of loss, which can be substantial and, depending on the type of product, can exceed the amount of money deposited in establishing the position.

Market participants should put at risk only funds that they can afford to lose without affecting their lifestyle.

© 2024 Cboe Exchange, Inc. All Rights Reserved.