How to Trade Upcoming 2024 Election Volatility

Jan 4, 2024

One of the top stories of New Year 2024 will be the presidential election.

And while there’s no way to tell who will lead the country after the votes are tallied, there is one certainty – volatility will soar with uncertainty.

In fact, we saw the same thing prior to most presidential elections with the Volatility Index.

  • Prior to the 1992 election (Clinton v. Bush), the VIX ran from 12.47 to 20.51.
  • Prior to the 1996 election (Clinton v. Dole), the VIX ran from 14 to 22.
  • Prior to the 2000 election (Bush v. Gore), the VIX ran from 17 to 27.
  • Prior to the 2004 election (Bush v. Kerry), the VIX ran from 13 to 16.7.
  • Prior to the 2008 election (Obama v. McCain), the VIX ran from 20 to 90.
  • Prior to the 2012 election (Obama v. Romney), the VIX ran from 15.5 to 22.
  • Prior to the 2016 election (Trump v. Clinton), the VIX ran from 12 to 22.
  • Prior to the 2020 election (Trump v. Biden), the VIX ran from 20 to 40.

We expect to see another round of high volatility ahead of the 2024 election, too. All thanks to uncertainty as to who could run the country, and new potential policy.

If you decide to trade the election volatility, consider these three funds:

Pro Shares Ultra VIX Short-Term Futures ETF (UVXY): As the VIX pops, so does the UVXY ETF, which was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. At the moment, the UVXY is cheap at $8.44.

iPath S&P 500 VIX Short-Term Futures (VXX): The VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index. It last traded at $15.52.

ProShares VIX Short-Term Futures ETF (VIXY): ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. The UVXY last traded at $15.51.

While most of these charts are ugly, we’re only concerning ourselves with the moves ahead of upcoming presidential elections. It’s just something to think about for 2024.

Happy New Year to you and yours!

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