Elections are historically a catalyst for volatility in the market, and Cboe Global Markets (CBOE) head of product innovation Rob Hocking joins Catalysts to discuss the risks ahead for the market. Hocking notes two major themes from Cboe’s annual Risk Management Conference: uncertainty and hedging in the market. He points to geopolitical and interest rate cut uncertainty alongside the US election giving investors some pause. “Right now, we’re seeing in SPX (^SPX) options, we’re seeing roughly call it a three vol [volatility] premium being priced into the November 6 options as opposed to the November 5 options kind of capturing that uncertainty in the election,” he tells Yahoo Finance. “And then, previously, we had seen a drop off in the curve from there, kind of indicating that a contested election wasn’t really something the market was pricing in. That since has changed, and now the curve is much more flat post-election, kind of implying that there is some risk to maybe a contested election and where we go from here.” Looking at the volatility index (^VIX), Hocking explains that the market is not only unsure about the election’s outcome, but also how long it may take to even get a result. However, it’s not all bad news for the market: “After the market settles in, we’ll move on to the next piece of information or the next data point on the horizon where people will start to price options around.” Watch the video above to hear how this election compares to how the market reacted during the 2020 election.
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