Hedge funds search for trades in dead-heat US election
Investors seek asymmetric trades with limited downside
Bitcoin and yuan trades seen as potential winners
Some say Trump trade overdone as race stays tight
By Carolina Mandl and Davide Barbuscia
NEW YORK, Nov 1 (Reuters) -Hedge funds and other investors are searching for trades that profit from a win by Republican presidential candidate Donald Trump, but also offer limited downside in the event of a victory by Vice President Kamala Harris.
As the nearly deadlocked race nears, some are looking for so-called "asymmetric trades" involving bitcoin or the yuan, assets which could yield big profits if Trump wins but would not cause big losses if the wagers are wrong.
"Trading the election is difficult given how tight it is," said Edoardo Rulli, head of UBS Hedge Fund Solutions.
Some betting websites have favored Trump, which has created momentum behind the so-called Trump trades. Others are now forecasting those trades, which involve bets that could benefit from a Trump victory, could lose momentum or reverse in the case of a Harris win.
Trades that could yield higher gains than losses in whichever scenario plays out include a long position in bitcoin, said David Kalk, founder at hedge fund Reflexive Capital.
He said the potential bitcoin upside would be two to three times the money which is put at risk if Trump wins, as he expects a more friendly regulatory approach to crypto under the former president. "The negative price response we expect (in case of a Harris' victory) just seems much smaller than the upside of a Trump win," Kalk said.
Macro hedge fund MKP Capital Management's founder Patrick McMahon said he sees shorting the yuan versus the dollar as an asymmetric trade, given the losses the Chinese currency may face if tariffs were imposed.
Some have placed neutral bets, such as pairing a short position on a stock with a long one, reducing directional exposure, said Robert Christian, chief investment officer at K2 Advisors. This way gains in one trade could offset losses in another.
Mario Unali, head of investment advisory at Kairos Partners, which manages a fund of hedge funds, said trades were pivoting to a Trump win because a victory for Harris is more about the status quo, so losses would be limited.
The hedge fund industry has so far posted gains of 8.3% in the first nine months of the year, according to research firm PivotalPath. The industry average is underperforming the S&P 500's 20% gain, putting some hedge funds under more pressure to adopt a more cautious stance on the race that will deliver some upside.
Jon Caplis, CEO of PivotalPath, expects some selling ahead of the election. "They could bank those returns, and then they could wait for weeks or months, depending on how long it takes before things become clear again."
TRUMP TRADE
Large wagers on betting markets have raised questions by social media users about whether they were swaying the markets or whether prediction markets were simply a better leading indicator of the race.
The Trump trades included a selloff in Treasuries, the yuan, and a rise in shares of Trump Media & Technology Group DJT.O.
Because the two candidates are still neck and neck a few days from the election, some investors question whether some of the trades placed on expectations of a Trump victory may be overdone.
An average of national polls according to opinion poll aggregator 538 on Thursday had Democratic presidential candidate Kamala Harris at 48.1% versus Trump at 46.7%, a gap which is 1.3 percentage point smaller than on Oct. 1.
"At the end of the day I think this short term move in Treasuries is probably overdone," said John Luke Tyner, head of fixed income and portfolio manager at Aptus Capital Advisors.
"If Harris wins you would probably see a snap back lower in long-term yields, but I think we’re going to see it either way," he added.
Strategists at Citi said they have recently exited some of their Trump trades, including one that profited from rising five-year inflation expectations.
"We have been taking profits on the view that the risk-reward is no longer compelling for some of these trades, with prices and positioning having moved and, in our view, perhaps more than polls alone would have justified," they said in a note on Tuesday.
A Republican sweep could exacerbate the bond selloff due to higher deficit spending expectations in that scenario, but there is also a "meaningful risk of a sharp reversal in a Harris victory," they added.
Reporting by Carolina Mandl and Davide Barbuscia, additional reporting by Suzanne McGee; editing by Megan Davies and Anna Driver
Aset Terkait
Berita Terbaru
Pengungkapan: Entitas XM Group menyediakan layanan khusus eksekusi dan akses ke Fasilitas Trading Online kami, yang memungkinkan Anda untuk melihat dan/atau menggunakan konten yang tersedia pada atau melalui situs, yang tidak untuk mengubah atau memperluas, serta tidak mengubah atau memperluas hal tersebut. Akses dan penggunaan ini selalu sesuai dengan: (i) Syarat dan Ketentuan; (ii) Peringatan Risiko; dan (iii) Pengungkapan Penuh. Oleh karena itu, konten disediakan hanya sebagai informasi umum. Anda juga harus ketahui bahwa konten Fasilitas Trading Online kami bukan sebagai ajakan atau tawaran untuk untuk melakukan transaksi apa pun di pasar finansial. Trading di pasar finansial mana pun melibatkan tingkat risiko yang signifikan pada modal Anda.
Semua materi yang diterbitkan di Fasilitas Trading Online kami hanya untuk tujuan edukasi/informasi dan tidak boleh mengandung nasihat dan rekomendasi finansial, pajak investasi atau trading, catatan harga trading kami, penawaran, permintaan, transaksi dalam instrumen finansial apa pun atau promo finansial untuk Anda yang tidak diminta.
Konten pihak ketiga apa pun, serta konten yang disiapkan oleh XM, seperti opini, berita, riset, analisis, harga, informasi lain atau link ke situs pihak ketiga yang tersedia "sebagaimana adanya", sebagai komentar pasar umum dan bukan menjadi nasihat investasi. Sejauh konten apa pun ditafsirkan sebagai penelitian investasi, Anda harus memperhatikan dan menerima bahwa konten tersebut tidak dimaksudkan dan belum disiapkan sesuai dengan persyaratan hukum yang dirancang untuk mempromosikan kemandirian riset investasi dan dengan demikian akan dianggap sebagai komunikasi pemasaran di bawah hukum dan peraturan yang relevan. Mohon dipastikan bahwa Anda telah membaca dan memahami Notifikasi pada Riset Investasi Non-Independen dan Peringatan Risiko kami mengenai informasi di atas, yang dapat diakses disini.
