Stock exchange is somehow somehow similar to weather forecasts. You never know what’s going to happen but its better to plan ahead and be prepared if a disaster strikes.
This is exactly what investors are doing right now as many fear a total election apocalypse. The left, the right and the center are all worried about highly unstable electoral outcomes a year from now.
Yes investors are putting a premium on the price of buying downside puts, meaning a negative bet on the S&P 500 is at a historical level compared to the price for upside calls, or an opposite bet in the option markets for higher prices.
Why Are Investors Putting a Premium on S&P 500 Puts a Year Before the U.S. Election?
Stock investors are scared about the election outcomes. They fear a stock crash and thus are buying premiums for downside puts – negative bet on the S&P 500.
And it’s unclear which way investors see the election results… But the left, the right and the center are all worried about highly unstable electoral outcomes.
Stock exchange specialists analyze that new situation saying: “To hedge out past the election, the price of downside puts relative to upside calls is literally pricing an election apocalypse. We have said it forecasts either a less business friendly attitude or a civilizational conflict with China after the election.”
Anyhow, if the hedging was for a month out it would not be that unusual. But when you’re pricing an option a year out, that volatility is a big deal. It’s an unprecedented apprehension.
What do Investors Fear After Next Year Election?
On the one hand, those fearing a less business friendly environment could be hedging against a Democrat win (Sen. Elizabeth Warren or Sen. Bernie Sanders).
On the other hand, investors could fear President Donald Trump’s trade war with China will continue and get worse after the election.
Stock analysts say investors are placing bets on the election early, in this presidential cycle, relative to other years. Some sectors are also moving ahead of the election, i.e. health care.
Fear is in the air, in the whisper of the trees, fear is in the air, in the thunder of the sea! Be ready for the big crash… It’s happening right now in front of our eyes. Food prices are increasing, major pandemics and earth changes costs increase every year and major indicators show we are heading to a recession. Follow Strange Sounds and Steve Quayle for more catastrophic headlines.
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