Options markets brace for US election Forex risk with volatility spike

📆 11/3/2024 2:08 AM

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📆 11/3/2024 2:08 AM
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Options markets brace for US election Forex risk with volatility spike

Options markets indicated a sharp increase in implied volatility, particularly as the tenor of the options included the upcoming U.S. election.

The observed changes began a few days before the one and two-week option windows, with notable movements around October 22 or 23, minimizing the likelihood of these changes being merely coincidental. Compared to the 2016 and 2020 elections, the rise in implied volatility has been more significant this year, signaling market uncertainty regarding both the election outcome and the subsequent policy agenda, particularly if President Trump were to win. This uncertainty extends to whether the outcome will result in a sweep or split Congress.

The AUD, NZD, and JPY, which have been the weakest G10 currencies in this period, could see a reversal in both spot and volatility if the election implications are perceived to be less severe than currently priced in by the volatility markets.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors.

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