Newly-listed volatility futures contracts are showing heightened expectation for stock market gyrations around this year’s presidential election in November, a sign that investors are already paying attention to the vote.

October futures on the Cboe Volatility Index started trading on Monday and were recently at 20.65, some 3.2 points higher than the September futures. The gap between September and October is currently the largest for any two consecutive months of the VIX curve.

Though the vote is still many months away, some on Wall Street have already started gaming out how markets might be impacted by the election, which is increasingly looking to be a rematch between Republican challenger Donald Trump and President Joe Biden, a Democrat.

Joe Tigay, portfolio manager for Rational Equity Armor Fund , said the “sizeable” gap could be reflecting expectations for election-based volatility as well as seasonal gyrations. While the futures expire in mid-October, they encompass S&P 500 options contracts that extend until the middle of the following month, making them sensitive to bets on market moves around the Nov. 5 vote.

The VIX historically tends to be elevated in October, with the so-called fear gauge logging an average monthly reading of 21.8, the highest of any month. It currently stands at 13.29.

In U.S. politics, October is known for late-cycle news events – dubbed ‘October surprises’ – that have in the past shaken up presidential campaigns, though their effects on markets have been varied.

Recent ones include the October 2016 release of a 2005 tape where Donald Trump made lewd comments about women and news that same month that the FBI was investigating more emails as part of a probe into Hillary Clinton’s use of a private email system that same month.

With about 3,200 contracts traded, volume in the fledgling contracts has so far outstripped newly-issued contracts for other months.

For instance, the August and September futures drew trading volume of less than 10 contracts in their respective first weeks of trading.

“This is obviously unique because it captures the election,” said Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group.


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