We have previously seen that $VIX has a slightly different pattern in election years than in most years. We wrote about this in the September 4th issue, so please refer to that article for more detail on this. The graph of $VIX in election years is reprinted on the right. The wild market action of 2020 caused point “A” to be much higher than it previously was (maybe we should be using the median here, too). The low point of $VIX after that occurs just about exactly on the first of September, and 2020 matches up with that pretty well. From there, $VIX rises sharply into October, holding onto its high levels until the election takes place and then begins to back off. It remains to be seen if that scenario will play out this year.
This article was originally published in The Option Strategist Newsletter Volume 21, No. 20 on October 26, 2012.
I’m always a bit dubious of analyses of how a particular indicator or market behaves in an election year. First of all, you have to throw out 75% of your results, which automatically reduces the reliability of the data. However, there are some patterns that seem to be significant, so let’s look at some of these.
