november election and stock stop loss / stop limit orders

me | 10/6/2020 | me

[SteveH]

any wisdom out there on the november election and setting stock stop loss or stop limit orders?

i am currently figuring that the worst is if biden wins or the outcome is placed into limbo pending recounts.

if this is the case, presumably there will be a dip in stock prices.

however, will the dip last very long? trump will still be in office until january 20, 2021, which means that stocks would seem still relatively safe up until january 20, 2021.

so, january 19 (eg january 15) or slightly earlier might make a good time to sell stocks manually.

any thoughts?

[The Pack Knight]

I think if you are concerned about election risk, you are best off selling now rather than waiting for the post-election volatility.

[Vigilanteman]

Charles Schwab gave a good seminar on this earlier today. If you look at their website (schwab.com) you might be able to find it. I bought a number of covered puts on my holdings with maturity dates from mid-September through mid-December. So far, three have expired. I let one cash in because it was near break-even and I had no real desire to keep it. Of other two, I redeemed with a small loss on one and a small gain on the other.

Covered puts are a good way to mitigate risk, but as the election draws closer, this type of insurance grows more expensive and you will do better in most cases just by cashing in now or waiting it out.

[CatOwner]

Goldman Sachs thinks the stock markets would do fine with Biden and a DEM Congress, for what it’s worth.

[LouieFisk]

“i am currently figuring that the worst is if biden wins or the outcome is placed into limbo pending recounts.”
—
There will be “civil unrest” no matter who wins; looters, arsonists and anarchists will take any excuse they can get to go at it.
Keep that in mind in your planning, at least the immediate/short term.

[lasereye]

The market started going up like a rocket right after Trump won in 2016. It actually started rising the 2 trading days prior to the election, which suggests the smart money knew Trump would win. The bottom line is, the market looks ahead. Trump being in office till January means nothing.

OTOH, the conventional wisdom for months has been that Biden is going to win, and the market has kept going up. That indicates the market is comfortable with Biden being President. Wall Street is giving him tons of money to lie about Trump after all. That should tell you something.

[SubMareener]

If you have a platform like TDAmeritrade’s Think ‘n Swim that keeps you stop loss order private until your condition is met. If a market maker can see your order they will take your stock.

[TennesseeProfessor]

The stock market is based on anticipated future earnings, not on actual results except to the extent that we expect past performance to be an indicator of future outcomes.

So the stock market is not going to wait for businesses to report on losses caused by Biden’s shutdown before going down — nor will they wait for the Biden shutdown to actually start. Any loss caused by Biden will be on election day or possibly even before if it becomes apparent that the electoral predictions are accurate.

[TexasGator]

If a stock is 100 and you set a stop-loss at 90 ...

If it opens the next day at 70 you will sell at 70.

If you set a stop-limit at 90 and it opens at 70 it may not execute.

[jonose]

My take is that doesn’t matter.
Boomers are pumping up the market with retirement savings.
The bubble will pop when the big retirement plans start paying out
More than they take in. Ironically COVID may have pushed this date
Out some.

[NonValueAdded]

I have to think that folks will harvest gains at current cap gain rates with a rate hike and possibly mark to market taxation if Biden wins and the House doesn’t flip.

[No_Mas_Obama]

I saw that but disagree. Assumption is that Biden’s massive deficit spending will help company revenues/sales more than the massive corporate tax increases will hurt the bottom-lines. As a company I’d rather have the certainty of corporate tax rates that benefit all industries, whereas Biden will send money to his cronies like Obama did. Corporate earnings will fall and take stock indexes with them.

[AndyTheBear]

I never hold a position during a big news event that might effect it. Just take the money out of the market and cancel my limit orders until the event and its immediate aftermath are over. Stop losses can be gapped right by if news is against you. If you know what your doing in trading you don’t want to throw in wild gambles.

[Professional]

I’m an Advisor.

I had UNH for a client that we bought for 30k, it had run up to about 200k, big winner. I suggested we use stops to let it run.

The stock was at 210, I put an order in at 199 stop loss. The stock went down from 210, to my stop (the penny), then shot right back later in the day to the 210.

Total theft.

[Professional]

Goldman Sachs is a criminal enterprise, for what it’s worth...

And if not for Warren Buffet giving them a loan, would have gone under in 2008.

[TexasGator]

“The market started going up like a rocket right after Trump won in 2016. “

S&P 500

10/24/2016 2151.33
10/25/2016 2143.16
10/26/2016 2139.43
10/27/2016 2133.04
10/28/2016 2126.41
10/31/2016 2126.15
11/1/2016 2111.72
11/2/2016 2097.94
11/3/2016 2088.66
11/4/2016 2085.18
11/7/2016 2131.52
11/8/2016 2139.56
11/9/2016 2163.26
11/10/2016 2167.48
11/11/2016 2164.45
11/14/2016 2164.2
11/15/2016 2180.39
11/16/2016 2176.94
11/17/2016 2187.12

[TexasGator]

“I’m an Advisor.”

I hope you don’t follow your own advice!

[krny9]

I don’t think the stock market cares much about the election. Civil unrest will happen unless the election mandate is clear. But it will be transitory. Whoever wins will get some sort of stimulus passed and there will be a lot of resistance to increasing taxes. More likely the market may have issues in 2021 and 2022 as the impact of the shut down of the small businesses and travel/entertainment industries will start to bite as the stimulus wanes. Some of these changes are going to be irreversible or very slow to go back to the original level.

[hinckley buzzard]

There is a consistent historical pattern of an October sell-off prior to presidential elections, followed by a post election recovery. If you want to play for that, now might be good time time to sell high valuation stocks, wait for the dip and buy back in after November 3. I am doing some of that, also buying QQQ November 20 puts.

[Professional]

How so?