The Election and Futures Market Movement
As the election season is officially upon us with the first Presidential Debate this past Monday, traders should be braced for possible volatility in the marketplace. The stock index futures market is just slightly below the all-time highs. With the exception of Brexit, the entire summer saw a constant bullish trend, with minor pullback buying opportunities.
So now what’s next?
Well, much like the election outcome, we do not know the answer. However, the fact that futures markets trade almost 24-6 and can be shorted just as easy as going long, this could be a reason to get involved in futures trading….
First, futures trade almost 24-6. While futures trading hours vary per product, most of the major futures markets that would be impacted during the election, have plenty of volume in the overnight sessions. These markets include the already mentioned stock index futures, and also include energies, metals and interest rates markets. As both candidates, Donald Trump and Hillary Clinton deliver their messages during the debates, markets, as seen on Monday night with a 100 point jump on the DOW after the election, move accordingly. This means traders can take advantage of the futures market outside of regular stock trading hours. We witnessed this particular scenario back in June with the Brexit vote.
Most of the directional change and massive market movement all happened before the opening bell the next day after Brexit. If you were just tuning in that morning, you completely missed the move. And these significant moves didn’t just happen in one market or asset class. Look at the US dollar, gold, or the 30 year bond futures. As the e-mini S&P 500 was tanking, other markets were taking off to the upside in just the same amount of fury. This very well could be a similar situation for the US presidential vote in the upcoming weeks. There are multiple debates that lead up to the final vote for the country so we could see several market movements based on these events.
If these market movements actually play out, there could be notable opportunity to catch a forceful move in either direction. The convenience of trading futures is regardless of the direction, up or down, you can easily make a trade to follow the trend. Unlike equity markets that often times are very difficult to short based on hard to borrow status and multiple fees involved, futures can be shorted instantaneously. It may sound uncomfortable or un-American to short the stock index futures market, but a bearish move could be one of the quickest [payouts] based on the timeframe in which bear markets unravel.
Whether you chose to trade futures during this historic event, or even sit on the sidelines, be aware of the expected volatility to enter the marketplace leading up to the event. The world is watching, waiting, and hoping to trade based off the outcome of the US Presidential 2016 decision.
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