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Institutional Insights: Nomura, US Election Hedging
Nomura's Flow Guru, McElligott, Discusses The Potential For A Panic To The Upside In Equity Markets Based On Volatility Hedging
1. Customers have made significant provisions for the possibility of adverse outcomes, which has led to increased forward volatility
2. The VIX takes the upcoming election into account, which raises the likelihood of volatility.
3. If event risks (such as "Gridlock" in the election, stable data from the United States, global easing, and China stimulus) are cleared without disruption, it could trigger massive unwinding of these positions, which could potentially reduce volatility sharply and give equities the ability to "propel" themselves into new all-time highs (and massively flatten the skew).
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!