VIX futures signal rising market anxiety ahead of midterms

Equity derivatives traders are preparing for greater stock-market volatility around the US midterm elections in November, Bloomberg reported.

VIX futures expiring in November traded around 19.7, compared with about 17.4 for September contracts and 19 for October contracts. The spot VIX ended Monday at 15.8, below its lifetime average of 19.4.

The futures curve suggests investors are increasing demand for protection against swings in the S&P 500 around the election. Matthew Thompson of Little Harbor Advisors said traders are entering the period when the election begins to influence volatility pricing.

Cboe Global Markets data show that realized volatility has been higher in midterm years than the prior year 80% of the time since 1945, with an average increase of 3.5 volatility points. S&P 500 returns have also tended to be weaker, with a median gain of 1% in midterm years.

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