The Market Is Preparing For This Huge Election Upset In November
(Tea Party 247) – As the pundits share their varying opinions on cable news about the outcome of the upcoming November election, options traders are preparing for the possibility of a contested presidential election that could drag on through the end of the year.
Fox Business reports that traders who specialize in buying and selling hedges against risk told the network that options markets are signaling the very likely potential for neither President Trump or Joe Biden to be clearly declared the winner of November 3rd’s election the day of.
They expect the battle over who the real winner of the election will be could drag on to months.
So what does this mean for the stock market?
Fox Business explains further:
Of course, there could be several reasons why investors are getting antsy about the future of stocks, given the coronavirus pandemic and the economic uncertainties it has created. And yes, there is always elevated options activity around a big event like a presidential election.
But people who make their living in the options business say they are taking very seriously the notion that, if he loses, Trump won’t immediately concede to Biden, or that mail-in voting will delay the final results for an extended period of time.
Andrew DeFeo, head of risk at Optimize Advisors, points to the spikes in volatility of S&P options in December and January — well after Election Day — suggesting a long and contentious recount that will shake the markets for some time.
Considering how this year has gone so far, it’s no wonder that traders are taking this pragmatic stance in anticipation of what could be to come.
Fox Business notes that, while traders aren’t always right in predicting the future, as they often miss the so-called Black Swan events that are unpredictable, they are good at predicting market volatility that is based on news events, like the financial crisis in 2008.
They were spot-on there.
“In other words, the markets may be in for a wild ride,” the outlet notes.