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OPTIONS: Vol Markets See This Year's Election as Most Consequential Since '08

OPTIONS
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  • As of today, two-week FX options begin to capture the first post-election results expiry on November 6th, leaving markets with a decent gauge of post-election expectations via implied volatility contracts.
  • The vol risk premium added ahead of the November 5th vote is the second-largest seen ahead of any presidential election this century (implied vol data becomes very patchy before 2000) - with only the 2008 Obama-McCain election seeing a greater risk premium, amid the backdrop of the throes of the Global Financial Crisis and acute global volatility.
  • The standout currency here is the MXN - the vol premium added today equates to close to 10 points, over double that seen in 2020 and clearing that added ahead of Trump's election in 2016 - which tripped a >10% intraday swing in USD/MXN on results day.
  • See chart below showing 2w implied vol premiums posted ahead of the past 7 Presidential elections:
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  • As of today, two-week FX options begin to capture the first post-election results expiry on November 6th, leaving markets with a decent gauge of post-election expectations via implied volatility contracts.
  • The vol risk premium added ahead of the November 5th vote is the second-largest seen ahead of any presidential election this century (implied vol data becomes very patchy before 2000) - with only the 2008 Obama-McCain election seeing a greater risk premium, amid the backdrop of the throes of the Global Financial Crisis and acute global volatility.
  • The standout currency here is the MXN - the vol premium added today equates to close to 10 points, over double that seen in 2020 and clearing that added ahead of Trump's election in 2016 - which tripped a >10% intraday swing in USD/MXN on results day.
  • See chart below showing 2w implied vol premiums posted ahead of the past 7 Presidential elections: