U.S. presidential debate reinforces election fears in options markets
NEW YORK (Reuters) – A fractious U.S. presidential debate on Tuesday night has done little to ease market worries that the results of the Nov. 3 election will be contested or uncertain, options markets showed.
Futures on the Cboe Volatility Index .VIX, known as “Wall Street’s fear gauge,” continue to show investors bracing for market gyrations in the weeks after the election, with elevated prices for November and December contracts.
For much of the year, October futures, which capture the Nov. 3 election date, had traded at a premium.
The pricing reflects concerns that a greater-than-usual number of mail-in ballots could mean delays of weeks in certifying election results and that a close outcome could be contested. VIX futures reflect volatility expectations in the 30 days following their expiration.
“Last night’s debate only solidified this fear for many investors,” wrote Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets in New York.
Worries over a smooth transition in the wake of the presidential election have grown in recent weeks.
In Tuesday’s debate, President Donald Trump declined to commit to accepting the election results, repeating his unfounded complaint that mail-in ballots would lead to election fraud. Following the debate, U.S. equity futures fell overnight while the VIX rose.
During Wednesday’s session, Wall Street’s major indexes advanced as data showed private payrolls increasing more than expected in September and Treasury Secretary Steven Mnuchin said he was “hopeful” that a deal on a coronavirus relief bill could be reached.
Yet VIX futures kept close to their previous levels, and the premium for November futures over October futures held steady, suggesting concerns for the months ahead had not abated.
“Last night didn’t change anything for anybody,” said Matt Thompson, managing partner at Thompson Capital Management in Chicago.
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