{"id":94073,"date":"2020-10-21T00:47:00","date_gmt":"2020-10-20T21:47:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/complacency-warning-election-premium-in-currency-market-collapses-much-like-it-did-in-2016\/"},"modified":"2020-10-21T00:47:00","modified_gmt":"2020-10-20T21:47:00","slug":"complacency-warning-election-premium-in-currency-market-collapses-much-like-it-did-in-2016","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/complacency-warning-election-premium-in-currency-market-collapses-much-like-it-did-in-2016\/","title":{"rendered":"#\n  Complacency warning? \u2018Election premium\u2019 in currency market collapses much like it did in 2016"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a419f211ce50\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a419f211ce50\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/complacency-warning-election-premium-in-currency-market-collapses-much-like-it-did-in-2016\/#Drop_may_offer_chance_for_cheap_volatility_hedges_if_pattern_continues_to_repeat_SocGen\" >Drop may offer chance for cheap volatility hedges if pattern continues to repeat: SocGen<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/complacency-warning-election-premium-in-currency-market-collapses-much-like-it-did-in-2016\/#William_Watts\" >William Watts<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  Complacency warning? \u2018Election premium\u2019 in currency market collapses much like it did in 2016<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Drop_may_offer_chance_for_cheap_volatility_hedges_if_pattern_continues_to_repeat_SocGen\"><\/span>\n  Drop may offer chance for cheap volatility hedges if pattern continues to repeat: SocGen<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000040093\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"inline\n              \" data-layout-mobile=\"\" class=\"\n        media-object\n        type-InsetMediaIllustration\n          inline\n  article__inset\n        article__inset--type-InsetMediaIllustration\n          article__inset--inline\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        renoImageFormat-\n        img-inline\n        article__inset__image\n      \" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:69.53125%;\" data-mobile-ratio=\"69.53125%\" data-layout-ratio=\"69.53125%\" data-subtype=\"\" class=\"image-container  responsive-media article__inset__image__image\">\n        <img decoding=\"async\" srcset=\"https:\/\/images.mktw.net\/im-245366?width=140&amp;size=1.4382022471910112 140w,\nhttps:\/\/images.mktw.net\/im-245366?width=540&amp;size=1.4382022471910112 540w,\nhttps:\/\/images.mktw.net\/im-245366?width=620&amp;size=1.4382022471910112 620w,\nhttps:\/\/images.mktw.net\/im-245366?width=700&amp;size=1.4382022471910112 700w,\nhttps:\/\/images.mktw.net\/im-245366?width=860&amp;size=1.4382022471910112 860w,\nhttps:\/\/images.mktw.net\/im-245366?width=1260&amp;size=1.4382022471910112 1260w\" sizes=\"(max-width: 140px) 100px,\n(max-width: 540px) 500px,\n(max-width: 620px) 580px,\n(max-width: 700px) 660px,\n(max-width: 860px) 820px,\n1260px\" src=\"https:\/\/images.mktw.net\/im-245366?width=620&amp;size=1.4382022471910112\" data-enlarge=\"https:\/\/images.mktw.net\/im-245366?width=1260&amp;size=1.4382022471910112\" alt=\"\" title=\"\"><\/div><figcaption class=\"wsj-article-caption article__inset__image__caption\" itemprop=\"caption\"><span class=\"wsj-article-credit article__inset__image__caption__credit\" itemprop=\"creator\"><br \/>\n            MarketWatch photo illustration\/Getty Images<br \/>\n          <\/span><br \/>\n  <\/figcaption><\/figure>\n<\/div>\n<p>       Poll-watching currency traders are growing more relaxed about the prospect for market volatility in the aftermath of the Nov. 3 presidential election, according to the options market.  <\/p>\n<p> Are they getting too relaxed?<\/p>\n<div class=\"paywall\">\n       The \u201celection premium,\u201d derived from measures of implied volatility via the FX options market, has largely collapsed as Democratic challenger Joe Biden holds a wide lead over President Donald Trump which is seen reducing the chances of a muddled or contested election outcome that could spark market turmoil, said Olivier Korber, a currency strategist at Soci\u00e9t\u00e9 G\u00e9n\u00e9rale, in a Tuesday note. <\/p>\n<p>But a similar collapse in the \u201celection premium\u201d in the runup to the 2016 election (see chart below) means traders could be getting \u201ccomplacent,\u201d he warned.<\/p>\n<div data-layout=\"inline\n              \" data-layout-mobile=\"\" class=\"\n        media-object\n        type-InsetMediaIllustration\n          inline\n  article__inset\n        article__inset--type-InsetMediaIllustration\n          article__inset--inline\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        renoImageFormat-\n        img-inline\n        article__inset__image\n      \" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:60.62500000000001%;\" data-mobile-ratio=\"60.62500000000001%\" data-layout-ratio=\"60.62500000000001%\" data-subtype=\"\" class=\"image-container  responsive-media article__inset__image__image\">\n        <img decoding=\"async\" srcset=\"https:\/\/images.mktw.net\/im-247402?width=140&amp;size=1.6494845360824741 140w,\nhttps:\/\/images.mktw.net\/im-247402?width=540&amp;size=1.6494845360824741 540w,\nhttps:\/\/images.mktw.net\/im-247402?width=620&amp;size=1.6494845360824741 620w,\nhttps:\/\/images.mktw.net\/im-247402?width=700&amp;size=1.6494845360824741 700w,\nhttps:\/\/images.mktw.net\/im-247402?width=860&amp;size=1.6494845360824741 860w,\nhttps:\/\/images.mktw.net\/im-247402?width=1260&amp;size=1.6494845360824741 1260w\" sizes=\"(max-width: 140px) 100px,\n(max-width: 540px) 500px,\n(max-width: 620px) 580px,\n(max-width: 700px) 660px,\n(max-width: 860px) 820px,\n1260px\" src=\"https:\/\/images.mktw.net\/im-247402?width=620&amp;size=1.6494845360824741\" data-enlarge=\"https:\/\/images.mktw.net\/im-247402?width=1260&amp;size=1.6494845360824741\" alt=\"\" title=\"\"><\/div><figcaption class=\"wsj-article-caption article__inset__image__caption\" itemprop=\"caption\"><span class=\"wsj-article-credit article__inset__image__caption__credit\" itemprop=\"creator\"><br \/>\n            Soci\u00e9t\u00e9 G\u00e9n\u00e9rale<br \/>\n          <\/span><br \/>\n  <\/figcaption><\/figure>\n<\/div>\n<p>       Korber noted that  most of the positioning in anticipation of a jump in volatility is concentrated on Nov. 4. There is also some risk priced over the following couple of weeks given the possibility of a delayed or contested outcome, but the premium has been receding.<\/p>\n<p>Fading fears of a contested or drawn-out election outcome have been cited across financial markets, including equities, where stocks have bounced after a September swoon. The Dow Jones Industrial Average<br \/>\n        DJIA,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210598065\/realtime\" class=\"positive\">+0.40%<\/bg-quote><br \/>\n       is up around 2.1% so far in October, while the S&amp;P 500<br \/>\n        SPX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210599714\/realtime\" class=\"positive\">+0.47%<\/bg-quote><br \/>\n       has gained around 2.5%.<\/p>\n<p><strong>See:<\/strong> Why stock-market investors are starting to focus on Biden\u2019s narrowing lead over Trump<\/p>\n<p>Measures of expected equity market volatility around the election have also declined but haven\u2019t dis<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>eared, analysts have noted.<\/p>\n<p>Korber noted that the repricing of risk in the currency options market coincided with developments in the nationwide polls, where Biden\u2019s lead over Trump widened to more than 10 percentage points, the largest gap of the campaign, after the first presidential debate and Trump\u2019s COVID-19 diagnosis. The RealClearPolitics average of polls shows Biden\u2019s lead narrowed to 8.6 percentage points as of Tuesday, but still remained comfortable.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>Polling data and publicly available data on betting odds for the election have been fueling action in the options market, he said, but noted that traders were wrong-footed in 2016 by both the U.K. Brexit vote, when British citizens voted to leave the European Union, and Trump\u2019s victory over Hillary Clinton.<\/p>\n<p>\u201cOn these occasions, the market reaction was proportional to the surprise, with a big volatility spike and major liquidity disruptions in the Brexit case,\u201d Korber recalled. \u201cWhile a lead of nearly 10 points in the polls is more confidence inspiring than a tight margin, Trump remains highly  unpredictable and the voting process in the COVID context adds uncertainty.\u201d<\/p>\n<p> Korber noted how closely the fall in the election premium has tracked the 2016 pattern, including for major currency pairs like euro\/U.S. dollar<br \/>\n        EURUSD,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210561242\/realtime\/sampled\" class=\"positive\">+0.28%<\/bg-quote><br \/>\n       and U.S. dollar\/Japanese yen<br \/>\n        USDJPY,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/210561789\/realtime\/sampled\" class=\"negative\">-0.25%<\/bg-quote><span>,<\/span><br \/>\n       both of which dropped to a low two weeks before Election Day only to rise sharply in the final stretch into Election Day (see charts below).<\/p>\n<div data-layout=\"inline\n              \" data-layout-mobile=\"\" class=\"\n        media-object\n        type-InsetMediaIllustration\n          inline\n  article__inset\n        article__inset--type-InsetMediaIllustration\n          article__inset--inline\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        renoImageFormat-\n        img-inline\n        article__inset__image\n      \" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:35.3125%;\" data-mobile-ratio=\"35.3125%\" data-layout-ratio=\"35.3125%\" data-subtype=\"\" class=\"image-container  responsive-media article__inset__image__image\">\n        <img decoding=\"async\" srcset=\"https:\/\/images.mktw.net\/im-247435?width=140&amp;size=2.831858407079646 140w,\nhttps:\/\/images.mktw.net\/im-247435?width=540&amp;size=2.831858407079646 540w,\nhttps:\/\/images.mktw.net\/im-247435?width=620&amp;size=2.831858407079646 620w,\nhttps:\/\/images.mktw.net\/im-247435?width=700&amp;size=2.831858407079646 700w,\nhttps:\/\/images.mktw.net\/im-247435?width=860&amp;size=2.831858407079646 860w,\nhttps:\/\/images.mktw.net\/im-247435?width=1260&amp;size=2.831858407079646 1260w\" sizes=\"(max-width: 140px) 100px,\n(max-width: 540px) 500px,\n(max-width: 620px) 580px,\n(max-width: 700px) 660px,\n(max-width: 860px) 820px,\n1260px\" src=\"https:\/\/images.mktw.net\/im-247435?width=620&amp;size=2.831858407079646\" data-enlarge=\"https:\/\/images.mktw.net\/im-247435?width=1260&amp;size=2.831858407079646\" alt=\"\" title=\"\"><\/div><figcaption class=\"wsj-article-caption article__inset__image__caption\" itemprop=\"caption\"><span class=\"wsj-article-credit article__inset__image__caption__credit\" itemprop=\"creator\"><br \/>\n            Soci\u00e9t\u00e9 G\u00e9n\u00e9rale<br \/>\n          <\/span><br \/>\n  <\/figcaption><\/figure>\n<\/div>\n<p>       Korber stressed that he wasn\u2019t saying that such a spike would definitely occur in 2020, \u201cbut market participants should be aware that it remains a possibility. <\/p>\n<p>\u201cIf the timing were to be the same, a U.S. election repricing is imminent, suggesting a final opportunity to set up a cheap vol hedge,\u201d he said. <\/p>\n<\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"William Watts\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"William_Watts\"><\/span>William Watts<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener noreferrer\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B21004575-02D4-D4B5-4572-D9C9D3981688%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener noreferrer\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Complacency warning? \u2018Election premium\u2019 in currency market collapses much like it did in 2016 &#8221; Drop may offer chance for cheap volatility hedges if pattern continues to repeat: SocGen MarketWatch photo illustration\/Getty Images Poll-watching currency traders are growing more relaxed about the prospect for market volatility in the aftermath of the Nov. 3 presidential&#8230;<\/p>\n","protected":false},"author":1,"featured_media":94074,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-94073","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/94073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=94073"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/94073\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/94074"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=94073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=94073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=94073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}