What happened to SPX the last time Local Elections surprised the market?
VixShield Answer
The last notable local election surprise for SPX occurred in the 2021 Virginia and New Jersey gubernatorial races. Markets priced in a continued Democratic sweep, but Republicans won Virginia and nearly flipped New Jersey. SPX reaction was muted.
On election night (Nov 2, 2021) SPX closed at 4613. On the following day it dropped 0.8% to 4577 as the surprise registered. Over the next five trading days SPX gave back roughly 1.9% total before stabilizing. Implied volatility on SPX rose modestly with VIX moving from 16.2 to 19.1.
From an iron condor perspective, the move was contained within normal 1-standard-deviation ranges. A typical 45-day SPX iron condor with 45-point wings would have remained untouched. The event produced a small VIX spike that quickly reversed, rewarding traders who sold premium on the post-election IV pop.
Under the ALVH methodology, this would have been classified as a low-conviction surprise because local races rarely drive sustained SPX momentum. Wing-width management stayed at 45-50 points with no adjustment needed. Position size was kept at normal levels since VIX stayed below 20.
Similar local election surprises historically produce average SPX moves of less than 1.5% over five days with VIX rarely exceeding 22.
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