The news that President Trump contracted Covid-19, followed a few days later by his confusing series of tweets about stimulus negotiations, left investors wondering what could possibly happen next. But many traders had already set up defensive hedges against sudden bouts of volatility, using options and futures. They'd prepped not only for an October sur-prise, but a November one, too. "The Covid-19 election is a unicorn," says Michael Arone, chief investment strategist for the U.S. SPDR exchange-traded fund business at State Street Global Advisors. "The range of outcomes has gotten a lot wider." One possibility markets are worried about: Trump refusing to accept a loss. That anxiety is most observable in VIX futures, a way to bet on volatil-ity. They tend to serve as a sort of insurance pol-icy against losses in the S&P 500. Hedging activity against outsize swings near the election has been vis-ible all year in these contracts. Normally, prices of VIX contracts rise as they cover dates further into the future. When plotted on a graph, this produces a gently rising curve. There's a simple logic to explain why: If you're buying insurance on your house, you would expect to pay more for a policy that covers six months than for one that covers only one month.
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