The upcoming 2024 US presidential election is already causing ripples in financial markets, as evidenced by trading activity in newly listed volatility futures contracts. 

These ​​contracts ​allow investors ​to ​bet ​on future stock ​market ​volatility and ​show ​heightened ​expectations ​for ​market ​turbulence ​around the ​​November election​​​​.

Specifically, October futures on the Cboe Volatility Index (VIX) started trading this week at significantly higher levels than September futures

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• October VIX futures are trading significantly higher than September futures, suggesting election worries.

• The gap between contracts is the widest of any two consecutive VIX futures months, signaling expectations for volatility.

• Volume for new October contracts already topping 3,200, far exceeding activity in other new futures.

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Bracing for Election: What VIX Futures Tell Us 

The gap between the two contracts is the widest between any two consecutive months on the VIX futures curve.

This suggests investors are bracing for potential volatility spikes leading up to the November 5, 2024, election day. 

The October VIX futures encompass S&P 500 options expiring in mid-November, making them especially sensitive to investors’ election-related worries.

“The sizeable gap could be reflecting expectations for election-based volatility as well as seasonal gyrations,” said Joe Tigay, portfolio manager for the Rational Equity Armor Fund.

Historical patterns also show the VIX tends to rise in October, averaging 21.8 for the month – the highest of any month. 

It currently stands at 13.29. 

October has a reputation for late-breaking campaign news that could influence the vote.

Recent examples include the October 2016 release of a controversial tape featuring then-candidate Donald Trump and the announcement that month about a revived FBI probe into Hillary Clinton’s emails.

The new October VIX futures volume has already exceeded 3,200 contracts, dwarfing activity in newly issued contracts for other months. 

This highlights investors’ focus on the upcoming election as a potential market mover.

The election increasingly resembles a rematch between President Joe Biden and former President Donald Trump. 

While the vote is still months away, some Wall Street analysts have already begun evaluating the potential market impacts of various electoral outcomes.

The elevated VIX futures activity suggests market participants are not waiting to hedge against election-sparked volatility. 

As campaign season kicks into high gear later this year, futures could offer valuable clues on which candidates investors view as posing the greatest risks.

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