How to Trade the 2020 Presidential Election

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We’re still months away from the 2020 presidential election.

However, it’s never too early to start thinking about how we can trade it.  In fact, one of the best things you can do is prep for potential, and sizable volatility.

We can use the:

  • iPath S&P 500 VIX Short-Term Futures (VXX)
  • ProShares Ultra VIX Short-Term Futures (UVXY)
  • VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

That’s based on history.

If we just look at historical mid-term election volatility, that’s very clear and tradeable.

  • Ahead of the midterm elections in 1990, the VIX jumped from 16 to 36
  • Ahead of the midterm elections in 1994, the VIX jumped from 11 to 18
  • Ahead of the midterm elections in 1998, the VIX jumped from 16 to 45
  • Ahead of the midterm elections in 2006 and 2010, the VIX fell
  • Ahead of the midterm elections in 2014, the VIX jumped from 12 to 40
  • Ahead of the midterm elections in 2018, the VIX jumped from 12 to 37

Ahead of presidential elections, we’ve seen similar moves in the volatility index.

  • Ahead of the Nov. 1992 election (Clinton, Bush, Perot), the VIX exploded from 13 to 20
  • Ahead of Nov.1996 election (Clinton, Dole, Perot), the VIX popped from 14 to 22
  • Ahead of Nov. 2000 election (Bush, Gore), the VIX ran from 17 to 31
  • Ahead of Nov. 2004 election (Bush, Kerry), the VIX ran from 12 to 14
  • Ahead of Nov. 2008 election (Obama, McCain), the VIX ran from 20 to 88
  • Ahead of Nov. 2012 election (Obama, Romney), the VIX ran from 15 to 22
  • Ahead of Nov. 2016 election (Trump, Clinton), the VIX ran from 12 to 22

In 2020, the election will be one that could create sizable volatility.

It’s best to start thinking about investing in volatility before that happens.  In fact, the best time to start putting money into the above-mentioned opportunities is late 2019/early 2020.

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