Election Results In- Questions Begin

In the early morning hours of November 9, as polls closed and the votes were tallied, questions began to surface.

The question asked by most traders was, “What do you think is going to happen in the morning?”

Trader A answered saying it could be worse than the big swings in 2008 with a minimum change of 800 points. What might happen to the market could be likened to a bubble that has been kicked down the road for a couple of decades and just hit a train at full speed.

Trader B felt that it could be a three to four month process, but once it’s all done, it might be a 3,000 to 4,000 point freefall. This trader enjoys being on the sell side of the trade and as such, is happy to ride the trend all the way down.

Trader C noted there were also profits in 2008 due to all the volatility, and is optioning to ride the trend day by day. They remembered that even in late 2007 and into 2008, the trend was not straight down. There were times when the markets flew way up and moved fast during Autumn of 2008.

At the same time as votes were being tallied, a check on overnight trading bid and offer prices at Nadex showed some interesting results. In the image below, the arrow shows how far the market would have had to move at that time to be at breakeven.

To view a larger image, click HERE.

The indicative (current market) price was 17595.47. However, should a trader want to buy the Wall St 30 (Dec) >17750 contract for 48.25, breakeven was 200 points lower at 17550, where the bid price was 48.00. It takes 10 strike prices (contracts) to get to breakeven. This is a huge movement and uncommon. Usually, breakeven can happen in the difference of about two or three strike prices or contracts. Luckily, the contract had over 15 hours until expiration, giving it plenty of time to work through a situation that was undoubtedly caused by the election results.

With all the uncertainties the markets are likely to see over the course of the next few months, it’s a good reason to trade on Nadex. As a Designated Contract Market and Derivatives Clearing Organization and CFTC (Commodity Futures Trading Commission) regulated exchange, Nadex offers capped risk, low cost trading and a wide range of markets to trade on Binary Options and Spreads. Trades are not bound by limits from the CME and since risk and reward are known upfront, there will never be a margin call.

Free trading education is available at Apex Investing.

PS The expiration value of Wall St 30 (Dec) was 18534.6 making the buyer of the contracts mentioned above profitable. This also shows how much the market moved the day after the election.