The CBOE VIX, which measures the anticipated market volatility using a portfolio of S&P 500 options, has risen over 16% in the last one month.
With the U.S. presidential election just a couple of days away, traders have started focusing on volatility-based assets as the risk of wild market movements appears to have increased.
According to a Reuters report, opinion polls indicate Republican Presidential candidate Donald Trump and Democratic Vice President Kamala Harris are neck and neck heading into Tuesday’s vote. With no concrete indication of a clear majority, it is widely expected that the market will see significant swings in the coming days.
The S&P 500 and the Nasdaq indices have been hitting record highs in recent times supported by corporate earnings and an easing interest rate environment. However, the CBOE VIX, which measures the anticipated market volatility using a portfolio of S&P 500 options, has risen over 16% in the last one month, indicating the rising fear amongst market participants.
The iPath S&P 500 VIX Short-Term Futures ETN ($VXX), which offers exposure to futures contracts of specified maturities on the VIX index, has witnessed a surge in retail sentiment on Stocktwits. The sentiment meter has inched up higher into the ‘bullish’ territory (60/100) compared to ‘neutral’ a week ago.
One Stocktwits user expects VXX to surpass the $55 mark soon.
Similarly, the ProShares VIX Short-Term Futures ETF ($VIXY), which track the performance of the S&P 500 VIX Short-Term Futures Index, has also attracted a lot of retail interest on Stocktwits, with the sentiment meter jumping into the ‘extremely bullish’ territory (79/100) from ‘neutral’ a week ago.
One Stocktwits user who expects a market crash in the coming times said it would be worth hedging.
As of Wednesday morning, the open interest data on the S&P 500 options expiring on Nov. 5 — the election day — show the possibility of a 3-4% potential move on either side.
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