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Trade of the Week – Expect a change in trading conditions post-US election

November 4, 2020

Trade of the Week – Expect a change in trading conditions post-US election

With the direction of the market riding on the outcome of the US election, I won’t be writing about a specific strategy, but I will discuss why…

With the direction of the market riding on the outcome of the US election, I won’t be writing about a specific strategy, but I will discuss why…

Implied Volatility is too high for a long call or a long put trade idea. The market could go in any direction, and implied volatility will likely fall after results are announced, reducing the value of your position. The time to enter into a long position would have been when volatility was lower two weeks ago, and you could take advantage of the downward direction move.

The risk of a large market move makes entering a short call or short put (or a credit spread) a risky decision today. With the Aussie market showing recent signs of trading outside the 5800 and 6200 range, the US election results could be the catalyst for a breakout move. We should expect the market to behave differently than it has over the last 5 months as the US election is one of the major events of this year.

I do not have a technical view on how the market will behave after tonight and I will be waiting for confirmation through the coming week’s price action. There is one thing for sure though – it will move up, down, or sideways?

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We wish you good luck with your trading, and as always if you have any questions, please feel free to contact our trading desk on 1300 805 795.

 

Past performance is not a reliable indicator of future performance.

Trading options is not suitable for everyone. There is a risk that you can lose more than the value of a trade or its underlying assets. You should only trade if you are confident that you fully understand what you are doing. If you are thinking about acquiring a financial product, you should consult our Financial Services Guide (FSG) at www.reachmarkets.com.au first. 

 


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