In dead-heat US polls, hedge funds hunt for trades
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 favoured 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
