With the US election comes volatility in the market. Volatility can be scary, but it can introduce opportunity. This opportunity is what I will discuss today - welcome to the VIX Election Trading Strategy!
The VIX is a popular volatility index "used as a barometer for market uncertainty, providing market participants and observers" (CBOE) a measure for market sentiment. Also called the "fear gauge" or "fear index" this index helps investor understand the sentiment in the market and potentially hedge against market downfall.
The VIX is a math equation. So how can one trade it? Through futures and options, investors can speculate whether the VIX will increase or decline. Popular futures include ProShares Ultra VIX Short-Term Futures ETF (UVXY) and Barclays iPath Series B S P 500 VIX (VXX).
So why even care about the VIX and elections? Well, election introduce uncertainty as the nation comes to find out who the next president of the US will be. This binary outcome can have cascading effects on future economic policy, world affairs, and national sentiment.
So, let's look into the data and discover trends in VIX Futures from previous elections.
Previous UVXY Trends During Election Years
