I’ve written about the Trump trade, talked to people making Trump trades, and parsed the Trump trade for clues that the 2024 presidential election is going one way or the other.
Finally, I made a Trump trade myself: a financial investment designed to profit from the outcome of the presidential election. I bought an options contract on shares of Donald Trump’s new company, Trump Media and Technology Group (DJT), with my own money. I will either make money or lose money based on the outcome of the presidential election – and then let you all know which way it went so you can cheer me on or roast me.
I am not an advanced trader. I could have simply bought shares in Trump’s company if I thought Trump would win, or shorted those shares if I thought Trump would lose. But the most popular trades are options on DJT stock, which are timed bets that allow the trader to buy or sell shares in the future at a certain price and within a certain deadline. I wanted to be where the action is and learn more about what’s happening deeper in the markets than where I normally go.
I’ve never traded options before, so I asked Eric Hale, founder and CEO of Trader Oasis, to guide me through the process. Hale didn’t tell me what to buy. He asked me what I wanted to do with the profession. He emphasized that his guidance did not constitute financial advice and that options betting has a binary outcome: I would either make a one-time profit or lose my investment completely.
Winner? Loser? Stay informed. Republican presidential candidate, former President Donald Trump, talks to reporters at Green Bay Austin Straubel International Airport, Wednesday, Oct. 30, 2024, in Green Bay, Wisconsin (AP Photo/Julia Demaree Nikhinson) ·ASSOCIATED PRESS
Frankly, he told me, this is not a smart way to spend your money.
I said thanks for the advice, can we figure out the trade now? I take the polls at face value. Trump and Democratic candidate Kamala Harris are actually linked. I have no inside information, and I have no idea who will win. So I didn’t feel strongly one way or the other about whether to bet on a Trump win or a Harris win.
However, I think the betting markets are overestimating Trump’s odds and traders are putting too much emphasis on the betting odds they think are bullish for Trump. That could be a false signal.
Jim Bianco of Bianco Research recently joined the YF Capitol Gains podcast to explain how betting markets work. At the time, the betting markets gave Trump a 60% chance of winning and Harris a 40% chance. If that were a poll, Trump would have a huge lead. But Bianco explained that betting markets are probabilities, not polling margins, and anything less than 66% for Trump is the equivalent of a toss-up.
Investors in DJT aren’t pretending the race is a toss-up. DJT, whose main product is the Truth Social app, is a pipsquean social media company with little revenue that probably doesn’t stand a chance if Trump loses. Trump himself is the only attraction on Truth Social – and if he loses in 2024, his political career will be largely over and Truth Social will lose the only real reason for people to join. But if Trump wins, Truth Social could be a necessary destination for anyone eager to know what happens when Trumpworld takes over executive power.
If there was a ‘Harris trade’ I would invest in that too. But above all, Kamala Harris represents the status quo on trading, financial markets and other issues that investors care about. Trump, with his plans to raise tariffs, deport millions of migrants and further cut taxes, would bring about the kind of changes that disrupt markets and reprice assets.
The DJT stock price is probably the best indicator of whether investors think Trump is likely to win. By mid-September, that didn’t happen, and DJT fell to about $12 per share, its lowest level since the company went public in March, closing at $58 on its first day of trading. Traders were essentially betting that Trump would lose and betting that his company would fade into obscurity. Since then, however, the stock has skyrocketed to $52 on October 29. On October 30, the day I placed my bet, DJT closed at $40.
I suspect that DJT is overvalued and will likely drop significantly in price. So I bought a put contract with a strike price of $25, expiring on November 15, 2024. An option contract typically covers 100 shares. The price of my put was $3.90 per share, or about $390 total, for the right to sell 100 shares.
What this means is that if the price of DJT remains above $25 during the time my contract expires at the end of trading on November 15, I will lose my $390 and the trade will be over. If the price falls below $25 before the contract expires, I’m in the money, as investors say.
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Hale helped me estimate my possible profits at different prices. I will break even when the contract expires, on November 15, when the stock price falls to $21.10. At that point, I will have fully recouped my $390 investment. At €15 I make a net profit of at least €610. My net profit would be at least $1,110 if the price drops to $10 and at least $2,110 if the price drops to $0. My returns could be greater if DJT’s price falls sooner.
My track record on trendy betting is poor. In 2021, I tried my hand at meme stock trading by buying 171 shares of BlackBerry at $14.60 per share, for about $2,500 total. If BlackBerry had done as well as GameStop, I could have made $200,000. But BlackBerry ran out of meme and I ended up losing $1,760.
Around 2017, I bought some shares of Fannie Mae, the giant mortgage insurer that had been in receivership since the 2008 financial crisis. The play was that the Trump administration would privatize Fannie Mae and turn it into a real company, causing its shares to rise. But the shares I bought at around $3.75 per share only went down. It now trades at around $1.40. I sheepishly sold a few years ago.
My bet on DJT falling below $25 could pay off if Trump wins the election and the stock price falls anyway. However, that seems unlikely, which means I’m essentially betting on Kamala Harris’ victory and Trump’s defeat. So Trump fans can freely troll me if Trump wins and I end up $390 poorer. If I win, I will try to be a good sport about it.
Anyway, check out Yahoo Finance for a final, climactic post on how my Trump trade turns out.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on X @rickjnewman.
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