(September 2020)

It is blatantly obvious that the nation is experiencing a great deal of tension about the forthcoming presidential election on November 3rd. However, what is starting to emerge is that investors’ anxiety has turned the election into the single largest risk event in the history of the VIX volatility index. Hedging against election market volatility has grown so intense that it has breached a record for the highest ever event risk. Let that sink in for a moment. According to Bloomberg “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 … That obviously suggests that markets anticipate some pretty incredible fireworks”.

 

(New York)

FINSUM + Magnifi: This is quite a realization, even considering the anxiety about the election. Given the tightening of the polls, it seems unlikely the pricing to hedge against volatility would abate. It seems more likely to increase.

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