Former institutional derivatives trader Kevin Muir warns: The risk of political instability from the US midterm elections is underestimated by the market, suggesting buying S&P 500 put options to hedge while volatility is low.
In his latest "The MacroTourist" market column, Kevin Muir pointed out that the market is clearly ignoring the risk that the results of the US midterm elections could be disputed or even trigger political turmoil. He believes that as the market calms down in August, the implied volatility of S&P 500 put options has significantly fallen from its July highs, with November contracts below 15% and December contracts around 14%. This provides investors with a window to pre-position portfolio protection.
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