Usually by this time in the election season we have a pretty good idea of who is going to win the election. However, like everything associated with this election, it is different this time. Things changed on a dime late last week and I'm having a hard time figuring out what to highlight with respect to the volatility markets. So forgive me if I miss a thing or two here...
Last Monday I showed the chart below and highlighted that implied volatility for SPX options expiring just after the election was a tad bit higher than it was for expiration occurring before the election. Keep in mind the chart below is from October 24th.
I created an update for this chart using today's closing prices and combined it with the data from the chart above. The change is nothing short of amazing.
November 9th IV went from 11.70 to 22.39 in just a week. Unfortunately we can't see what would have happened if there had been no change in the polls, but we have to assume that the sudden toss up that this election has become has something to do with the change in the chart above.
I'm always a fan of looking at the relationship among the four volatility indexes that are based on S&P 500 option pricing. For those unfamiliar with the indexes on the chart below, all four represent SPX implied volatility over different time frames. Specifically, VXST is 9-day, VIX is 30-day, VXV is 3-month, and VXMT is 6-months it terms of the time frame being represented.
VXST was higher than the other measures on the close yesterday and the relative level rose today as the market adjusted for pending election uncertainty.
Finally, we witnessed across the board increases in volatility. All but one of the 29 volatility indexes quoted by CBOE were higher today with VXST leading the way higher and a mix of markets rounding out the top of the list. The only market that yawned at the recent polls was oil.
We already knew this election was going to go down as a different sort of race. I really didn't anticipate the final stretch resulting in so much uncertainty. My plan is to keep a close eye on things and continue to report back here as market conditions change.