Election Day is Tuesday, Nov. 5. In 2020, news organizations were confident enough to call the race for Joe Biden on Election Day night, which is the usual outcome. The only modern exception was the 2000 election, which hinged on a recount in Florida and took more than a month to decide.
The 2024 election could entail another delayed outcome — and this year, traders are getting in on the action.
Donald Trump’s new company, Trump Technology and Media Group (DJT), has become a sort of proxy bet on whether Trump, the Republican presidential nominee, will win or lose. If Trump wins, his company, known by its ticker symbol DJT, could become a hub of info for the new president and everybody in his orbit through the Truth Social media app. If Trump loses, by contrast, Truth Social, an also-ran behind goliaths such as Facebook, Instagram, TikTok, and X, will end up as a rump single-purpose Trump megaphone with little value.
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For the last several months, the buying and selling of DJT shares has been a key “Trump trade” — a bet on whether Trump or his Democratic opponent, Vice President Kamala Harris, will win the 2024 election. Investors now seem to be betting on the timing of the election outcome through option contracts that give investors the right to buy or sell the stock in the future at a certain price. Options expire, typically on Fridays, so an investor buying an option is placing a timed bet. If investors were betting on DJT surging or crashing right after Election Day, they’d be piling into option contracts that expire Nov. 8, three days later.
But they’re not. The heaviest action by far is in DJT option contracts that expire Nov. 15, 10 days after Election Day. The amount of “open interest,” or number of contracts traded, is nearly eight times higher for the Nov. 15 vintage than for Nov. 8. After Nov. 15, the open interest plunges.
“People think we’re not going to know the election results on Election Day, or even on Nov. 8,” said Eric Hale, founder and CEO of Trader Oasis. “Traders betting on the election are betting on a Nov. 15 outcome.”
Praying for a victory? Republican presidential nominee and former President Donald Trump participating in a Latino leader roundtable, on Oct. 22, 2024 in Doral, Fla. (AP Photo/Alex Brandon) ·ASSOCIATED PRESS
It’s plausible. Most of the seven swing states — Georgia, North Carolina, Pennsylvania, Michigan, Wisconsin, Arizona, and Nevada — appear to be dead heats that could easily be decided by less than 1% of the vote. Pennsylvania and Wisconsin prohibit the counting of mail-in ballots until Election Day, which slows the tally. Arizona and Nevada also tend to have slow vote counting. And this time around, both parties have armies of lawyers ready to contest any irregularity in court.
In 2020, Pennsylvania took five days to certify Biden’s win in the state, even though news networks projected the outcome on Election Day. Financial markets can move on wisps of information, so in a close vote count this year, DJT would likely be moving on hints that the final tally will go one way or another, well ahead of any official count.
The election will be a reckoning for DJT, which went public in March at around $50. The company has little revenue and poor financial performance — and would probably have no chance if not for Trump’s presidential bid, which could bring millions of new users if he wins. The stock's value has yo-yoed this year, in sync with Trump's electoral fortunes, hitting a high of $66 in March and a low of $12 in September. It's been on an upswing since the beginning of October, with shares up 108% to about $33.50.
The stock is massively volatile, with an “implied volatility,” or IV, of around 300%. That’s off the charts. IV reflects the range of bets traders are placing on the future price of the stock. An IV of around 20% is normal. A stock’s IV might surpass 100% prior to an unusual event such as a clinical trial for a make-or-break pharmaceutical. Hardly any company reaches Trumpian levels of volatility.
Option traders love volatility because it represents an unusual chance to score a big profit with manageable levels of risk. “Volatility is a shiny thing for traders, and right now DJT is the shiniest that exists,” said Hale. DJT is similar to a meme stock that trades for reasons unrelated to the company’s fundamentals, except for one thing: The 2024 election is a singular event that will have a binary outcome and possibly determine the company’s fate.
Hoping to beat the odds: Democratic presidential nominee Vice President Kamala Harris and former Rep. Liz Cheney (R-Wyo.) react during a conversation moderated by Charlie Sykes in Brookfield, Wisc., Oct. 21, 2024. (REUTERS/Kevin Lamarque) ·REUTERS / Reuters
Standard formulas for pricing an option trade suggest DJT stock could go as high as $39.35 or as low as $16.33 within two weeks of Election Day. What the trading data doesn’t reveal is which outcome, up or down, is more likely. Traders often hedge bullish bets on a higher price with bearish bets on a lower price, hoping to profit by finding gaps or spreads giving them an edge no matter what the outcome.
Frenzied option betting, such as that on DJT, also requires market-makers selling options to buy more actual stock in order to keep their own risks neutral. That in itself can push the stock price up, creating the false impression of bullish sentiment when, in reality, the buying is driven by temporary derisking that will subside.
Betting markets are another Trump trade that has moved in Trump’s favor recently. From late August to early October, Trump and Harris were within a couple points of each other in betting markets, with Harris ahead for part of that time. But Trump is now ahead by roughly 60% to 40% in the RealClearPolitics aggregate, drawn from eight betting pools operated offshore, which Americans are not allowed to bet on but probably do through cryptocurrency and anonymous accounts.
Polymarket has drawn attention because of one “whale” known as Fredi9999 who has wagered more than $18 million on Trump winning the electoral vote, the popular vote, and certain states. The Wall Street Journal recently posited that one individual controls the Fredi account, plus three others accounting for $30 million in Polymarket wagers on Trump. Large wagers can change betting odds in their own right because they sometimes force bookmakers to adjust the odds just to assure they’re not overexposed to a small bet or group of bets.
Betting markets don’t reflect a candidate’s real election odds. One simple reason is that people who participate in betting markets are self-selected and don’t necessarily represent the electorate. Most political analysts say betting markets overstate Trump’s odds, with the presidential race essentially too close to call.
Those rising odds for Trump could make traders more eager to bet on DJT, however, pushing the stock’s volatility even higher than it would otherwise be. And this is all before any meaningful counting of votes.
The unruly 2024 election is also, for the time being, a surreal investing opportunity.
