Sell the Election News on DJT — A Trade Breakdown (bonus: some Polymarket stuff)

Let’s rewind to October 17th.

I don’t care about trading anymore. I do still care about money. My vision is to trade 1-2x a month, nail the best opportunities, then fuck off indefinitely and live real life. I’m just a (semi) retired sandwich blogger now.

I still have some hidden delusions though. Every four years I think to myself… I could be the sharpiest sharp of all sharps. For those unfamiliar with betting lingo, a “sharp” refers to an experienced and skilled bettor who consistently makes profitable wagers–usually in sports betting or prediction markets. And yes, in this context of every four years, I am talking about the 2024 U.S. presidential election.

Do you remember the 2020 election? Let’s rewind again.

It’s Trump versus Biden. Prior to election night, Biden’s got a huge lead in the polls and a decent betting markets lead–but not quite a full reflection of the polling lead because nobody trusts the polls anymore after 2016 when Hilary had a 4% polling lead and lost in an upset.

It’s 9pm EST on Nov 5th. Early votes are being counted. Trump starts to gain a lead. The NYT needle goes from 80% Biden to 50% and then even further to a dead-on 75% Trump lead. Dems and Biden bettors are on twitter panicking. Oh fuck, oh fuck, oh fuck, not again… we’re repeating 2016–never trust polls, fuck Nate Silver forever, why are we such idiots???

You have Biden trading on FTX at 20c. Nobody wants a piece of it. Trump won again, what’s the point?

The clock strikes midnight. Biden starts rapidly regaining equity in the swing states. All of them. Blue wall. Georgia. Nevada. Republicans and Trump bettors are now panicking. What the fuck is this shit, it’s rigged??? It’s those illegal and fraudulent mail-in votes!

The sharpiest sharp bettors reveal themselves on twitter as the 20c Biden buyers. They cashed in. The blue wave came in via the mail and they got counted later than the walk-in voters. Bernie Sanders even warned beforehand how this would unfold. The rest is history, Joe Biden wins.

INFORMATION IS KEY! All those reversals, volatility, fear, inefficiencies… you can swash buckle through all of that and cash in with correct information. You have the right information, you make the right bets, you’re a legendary sharp forever. Imagine being the bottom-tick on such a historic event? I wanted that notch on my belt.

So while I’ve been largely ignoring politics up until October 17th¹there was also a thing called the World Series going on at the time, GO DODGERS!, something reignited my interest in the political betting markets. It was this tweet.

This Domer guy was, at the time, the #1 most profitable trader on Polymarket. He noticed a huge amount of money coming in on the Trump YES vote and did a little digging to discover it was this huge French whale bettor on multiple accounts, betting a staggering $40 million on Trump to win the electoral and the popular.

I noticed at the time seeing Kamala’s Popular Vote odds trading around 62c, far lower than most of the year.

My initial thought was this is free money! The Dems haven’t lost the popular vote since 2004 and prior to that, since Reagan in the 80s. They have absolutely dominated the pop vote, even in losing years with “weak candidates” like 2016. Kamala Pop Vote YES should be trading north of 80% and the only reason it currently isn’t is because this French whale bettor is jamming the market up with too much money. Market manipulation!? Maybe. All I know is this: it’s time for me to fade this and be the sharpiest sharp of all sharps.

If something is truly free money, I’m not scared to bet $100k or more on it but after some quick preliminary research, I had to check myself a bit. I wrote most of the reasons why in my sandwich blog here. Long story short, here’s why I lost confidence in the Kamala popular vote bet and decided to bet a small amount only: 1) I’m a tourist with no expertise in this, 2) her polling lead is even more narrow than 2016 and Trump has outperformed polls historically, and 3) there’s no trustworthy data to make me feel confident Kamala would outperform her projections, it’s just nice-sounding narrative-driven ideas like a record turnout from single-issue voting women²(that single issue being abortion). I needed to believe in something real to feel confident but since I didn’t, I had to downgrade my conviction. New assessment was as such: Kamala’s price was probably fair value, maybe slightly good value given that Polymarket was trading at Trump premium relative to other sites, but far from free money.

Pete being an election sharp who makes a killing? Nah, not yet, not on this. Maybe the unexpected event happens on election night with dramatic reversals and that will be the big play like in 2020 but for now, I held off on any real risk. Probably best to find a trade that fits my core competency: Short a piece of shit stock while it’s going parabolic.

October 29th, 7 days before election

Look at this thing. These are the situations that are up my alley and they don’t require any analysis on bullshit polling data. It doesn’t matter who wins the election to win on this trade.

This stock is DJT aka Truth Social and formerly known as DWAC. It’s a piece of shit. It’s going parabolic. Boxes are checked. Even though I’d prefer the peak of the parabolic move heading right into the event (similar to what happened on the China play), it seems like max participation on DJT was happening the week prior to the election. I had to get short now rather than wait until post-election.

This is an obvious Sell-the-News situation. If Trump loses, DJT has a massive gap down. That’s the obvious part. Here’s the part that poorly-informed investors don’t understand: If Trump wins, he’ll probably have to sell the stake³ (or put his stock in a trust? I don’t know how it works. I haven’t even looked up the rules, you’d think I should but I don’t want to overthink) which adds supply to the stock. Or even if he doesn’t do that right away, market dynamics will take care of it. Max participation has already been reached and early speculators will dump on the late buyers. There is no viable business with DJT, it’s purely a vibes stock and you just have to understand how the vibes ebb and flow.

The stock could be tricky and I didn’t want to adapt an intraday mindset and get caught up in the small swings so I decided to split my short position between shorting naked calls with massive premiums that I’d hold until expiration and shorting a little bit of stock that I’d cover into a big initial dip.

I short $50k worth of premium on 60, 65, and 70, a mix of Nov 1 and Nov 8 strikes. How do I determine which strikes? I have a very complicated fair-value options pricing model that determined no I’m just guessing like you are, those seem like good prices to me. I also short 2500 shares in the 50s. I cover the stock into the dip in the mid 40s to make around $15k. The stock reverses that dip and goes right back to 54, even making a new intraday high. See–that’s the annoying shit when you’re day trading. Those intraday V-shape reversals that eat up all your gains if you are too locked into a deeper target to cover. I decide to hold my naked options position, thinking these are good levels to be short if DJT manages to get there and I’d have my fat 600% IV premiums as a backstop. It fluctuates between red and green for most of the day.

October 30th, 6 days before election

After a twisty & turny first day in the postion, I’d like a nice fat red candle to properly confirm that I’m right and I get exactly that.

Stock’s weak. Profit taking ensues.

By week’s end on Nov 1st, DJT closes at $30.56 Easy money. Still hanging onto my Nov 8th naked calls position while the Nov 1st strikes expire worthless. My mixed options position is marked up +$50,000 so far.

November 4th, 1 day before election

A bunch of shit happened over the weekend. Kamala has closed on the initial Trump swing in the betting markets. In the electoral college betting contracts, she reaches 50-50 with Trump on Kalshi. In the popular vote on Polymarket, Kamala’s YES price that was once as low as 58c now climbs back to 75c, right around the range it was trading in before the (maybe Freddi-driven) October 17th Trump swing. Why did this happen? An 800-sample poll in Iowa favoring Kamala by 3. It’s the holy grail of all polls or something, according to election nerds. I don’t really get it.

It doesn’t make sense to me so I make a bet on Trump to win Iowa after the Selzer poll pushes Trump Iowa YES from 97c to 81c. I’m still keeping everything small, expecting better opportunities the night of the election.

The market opens. I’m greedy and I want to make 100k so the mindset is to add risk. Adding risk at this point, with DJT having already correctly near 50% from its highs, is taking me away from doing the efficient thing, the pro thing, the sharp thing… which is to flatten my position for a fat realized profit and then have the option to reload into more volatility with 2 trading sessions to go before the moment of the truth.

Well maybe he’ll lose and I won’t even stress it. Selzer poll could be the truth? that’s the shit I say to make myself feel better about my moves, even though I don’t believe it.

DJT CLEARLY bottoms on Monday. I mean, it dips under $30 and reclaims $30. Then it goes green after it’s been negative 4 straight days. Of course it wants a last hurrah into Nov 5th.

I mean, don’t be a fucking pig Pete. Jesus Christ. Reduce and wait?

I trade big once a month. This is the play. I gotta get to $100k profit potential and let it make my month. Everyone gets what they want out of the market⁴Ed Seykota!. I want to win $100k, let’s win 100k.

So DJT climbs back to $35 in the middle of the day. I keep writing naked Nov 8th calls. IV has now reached a staggering 675%. I’m pretty sure these people are dumb. I’ve been trading 15 years, I’m not the dumb one.

I start looking at the OTM puts expiring on Friday. $20 puts are trading at 2.50. $15 puts are trading at $1.25. These are simply insane prices for investors to be buying insurance if Trump loses ⁵this is even more dumb if you’re buying those for short exposure.

Now I think to myself: Let’s get fancy and turn this into a naked straddle. Both sides are stupid!

I short about $15k in OTM puts. Not nearly as much as the naked call side but I’m pretty sure this is the smart move. First of all, Trump is favored. Second of all, even if he loses, it would still need a 50% gap down to threaten my strikes and REMEMBER… this is not a biotech that halts down and opens 80% and goes sideways all day. No that only happens when there’s a stock trading on business fundamentals. This is a VIBES stock. You think if Trump loses and it’s still close and then DJT gaps down, that all these MAGA believers will just puke out and take the L? They’re gonna say it’s rigged and wait it out until January. That’s what they did in 2020 when FTX Trump YES contracts still traded above 5c until inauguration. It will bounce just on that and all I need is 3 more days.

That’s IF he loses of course. So now I have about 75k in total premium, most of it still in green PnL from last week’s perfect entries. DJT then gaps up afterhours to $37 and a perfectionist part of me says I should have covered the call side and reloaded but whatever–what’s done is done, be a man and stomach the vol.

November 5th, the day of the election

It’s 10am. DJT trades at $40. My calls’ mark-to-market profit has now declined by more than 50% from its peak on Monday morning. It was once at 50k, now it sits around 25k. The naked puts have hardly budged, they are only down 10% for some reason. IV has now climbed to 750%. I keep adding naked calls on the way up, including some $47 strikes, which is a little aggressive.

Should have covered at $30 and reloaded at $40 Pete. I’m getting a little nervous, maybe stop adding?

I try to scalp DJT with day trades but I struggle and chop myself up for -2k. It annoys me even if it’s just a fraction of what is at stake on the naked straddle. I’m just not the same guy when it comes to quick game trading these days.

I decide to turn my computer off for a few hours and take a nap. This isn’t going to resolve until the morning of the election, there’s nothing to do. I’ve made my bed and decided to add risk into a binary event rather than do the easy thing of just taking a nice profit before hand and maybe reloading at better prices or simply trading post-event. I know what I’m doing.

I wake up and I decide to check quotes.

DJT is halt limit down.

I don’t think this matters until tomorrow but my mark-to-market looks a lot better which helps my lizard brain feel better.

I know what I’m doing. Freddi is probably just a rich fool and Trump isn’t that strong! This is a 50-50 race and they’re dumping.

I add even more naked calls. I’m up to $105k in premiums. Now at this point, I notice that my straddles aren’t really declining that much… because the IVs have jumped to over 800%.

I have a conversation with my good friend Clockwork, who is also in this same trade but he’s more conservative than I am and has only shorted strikes $80 and higher on the call side. And most of our little chat isn’t really anything earth-shattering, it’s a simple trade and we both know the risks. But I write this out to him.

Pete: am I being an idiot? I can’t believe these people are paying 800 pct IV for this. Either side.

Clockwork: yeah I mean it could find $50 if Trump wins again. I’m only writing $80 or higher.

Pete: no. they’re definitely idiots. if i’m the idiot, so be it but I’m not.

November 5th, 7:45pm

I’m in bed. Not because I’m sleeping but because I lie down with my 1 year old daughter until she knocks herself out. If I’m not there, she gets upset. I’m looking at prices on my phone while holding her tiny hand. Probably too early for movement because polls haven’t even closed yet… right?

No. It went to $45 on air with just a whiff of Trump having some small leads in exit polling. Is it possible.. that… I have completely fucked this up? I could have just taken my $50k from last week and waited until Nov 6th to re-evaluate with no overnight risk. Um…

I’m now very, very afraid. I thought this scenario might happen… a gap to $45-50. I figured thats the most likely scenario on a Trump win. But when it’s ALREADY THERE OVERNIGHT?

What if I missed the mark? What am I even basing my scenarios on, just make-believe prices? Gut feeling? What if this is at $80 pre-market? Fuckin’ idiot. Was at 800 IV for a reason you dumb idiot.

What’s done is done though. What about being the sharpiest sharp of all sharps by making genius bets on big election night overreactions? It’s still early… but Trump is climbing. Polymarket has his Electoral YES at 75c. The NYT needle has him inching to 70%.

It’s 9pm.

My small Kamala Pop YES vote starts to crumble on Polymarket. It’s now trading below 50c. Fuck no that was never free money. I’m not even tempted to double down. Maybe it was never truly a 50-50 race, maybe we all just measured a Trump landslide poorly from the getgo. I’m an idiot when it comes to political betting, I don’t know shit.

I look at the DJT overnight prices… $50.

Bro. What if Freddi bought DJT in that afterhours spike? He knew. HE KNEW.

I decide to withdraw my remaining money off Polymarket rather than make new bets and live up to being the super sharp of my dreams. I think Trump clearly has it locked up and there likely won’t be any amazing reversals.

I’m way too emotional right now to make money. My executive function has deteriorated and I don’t feel in control. I’m just watching things unfold rather than being in “head on a swivel” mode looking for betting opportunities. I hate this feeling–it’s why I’m semi-retired now, I can’t get over this. Sleep is of utmost importance… we might have to go war with Freddi tomorrow.

November 6th, the morning after

I wake up at 3:55am. I haven’t been awake at this time for a long time–not even for the China bet a month ago⁶I already knew I was in a good spot from the overnight trading.

Even though there’s nothing I can do because I don’t even have the right broker to trade at 4am, I’m watching quotes anyway to put myself through pain. 4am, the exchanges open… DJT trades to $54. Jesus Christ. If it gets above last week’s high and holds, I might lose six figures like an asshole.

I try to sleep but I just end up doing the same thing, try to sleep… restless.. check phone again. It’s now back under $50, hitting a low of $42… my lowest strike is $47… I think I’m ok… or is that pure copium before the biggest loss ever? I don’t know. It’s way too early. Retired traders shouldn’t care about ultra early pre-market prices. I can’t do this anymore.

8am.

DJT has settled under $45 nicely… it *seems* like a pre-market sell-off. Fear subsides while experience and instinct return to my blood stream. I know what to do–I need to short the stock when this opens. I enter a market order at 9:30–not something I usually do but my quick thought was if this is what I think it’ll be, then the top will be in very early.

9:30am.

There’s a massive amount of volume, so much so that my quotes lag. My level II is showing DJT $45 bid/ask when it’s already trading at $42. I fill short low 44s. It sinks like a rock in the first 10 minutes and has a limit down halt at $39.

By the close, $36 with a low of $34

Afterhours…trading at $32 and fully roundtripping the entire election victory gain. My naked straddle is a lock to expire worthless on both sides.

Sell The News my friend. Always Sell the News.⁷Other lessons: stick to what you’re good at. Don’t bet much when you know you’re a tourist. Don’t trust black box low-sample bullshit polls. Don’t assume some random whale = manipulation or creating inefficient markets. Find trades where you don’t have to predict the election winner to win.

Got my 100k (and more). Freddi has his tens of millions–all good with me, we can’t all be whales. I’m just a sandwich blogger now and I happily take what’s mine. See you all in four years.