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Asset Servicing | June 5, 2024

Volatility Prior to the Election

While VIX has not exceeded 20 in over 7 months and put/call premiums are still bullish, investors are beginning to buy protection in advance of the US election. The cost of buying protection against a 10% fall is the highest since October 2023. This graphic from Goldman Sachs also shows that VIX futures are pricing in volatility far sooner than in other election years. Even compared to the 2020 election, which was complicated by the pandemic and mail-in ballot issues, VIX futures today are suggestive of higher expected volatility.

This development is one that our options team will continue to monitor and report on. The fact that investors are thinking about and protecting against volatility is likely a positive sign, especially after how unpopular portfolio insurance has been over the past year.

 

 

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Grant Johnsey

Grant is responsible for delivering capital market solutions to institutional clients across agency brokerage, transition management, security finance, and foreign exchange.

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