Trading the Election

Moments ago we saw a trader buy 51,504 XLV Nov. 42 calls for $0.07 with XLV at 40.40. This is a bullish bet that XLV, the SPDR Health Care Select Sector ETF, will be above 42.07 in 14 days, or 4.1% higher. We think this is actually a bet on the outcome of the election. An Obama victory is likely to benefit healthcare stocks while a Romney victory is likely to benefit the energy sector. Various polls show a wide range of election outcomes, with most showing Obama holding a narrow lead. At the office we like to watch markets like inTrade to see where people are betting their real money. The inTrade market for Obama to win currently implies that he has a 66.3% chance of winning. This trade is risking $360,528 and could potentially make many multiples of that, and shows how some of the smart money is beginning to position themselves for an Obama victory.