Potential midterm-election chaos can roil markets. Here’s one trader’s play.

With control of Congress hanging in the balance, the November midterms present a risk that extends beyond the usual political shift in Washington. Market participants are increasingly focused on a scenario in which the results are too close to call or legally contested, dragging the outcome into uncertainty for days or even weeks. Such a stalemate historically introduces a fog of unpredictability, and equity markets tend to dislike unresolved questions regarding fiscal policy, government spending, and the debt ceiling.

In this environment, veteran trader Kevin Muir notes that a straightforward defensive approach stands out as an unusually clear opportunity. He frames buying portfolio insurance—options designed to hedge against a market decline—as a "chip shot" given the binary nature of the risk. The logic is simple to grasp: hedges typically cost a premium, but when a specific and identifiable catalyst looms, that premium can be worth the price for investors seeking to ride out the headlines.

For the broader market, the relevance lies less in which party wins and more in the integrity of the counting process. Watching for legal challenges, recounts, and the timeline toward official certification will be key. Any whiff of procedural deadlock could inject a fresh wave of volatility, making protective positioning a topic of discussion for portfolio managers regardless of their political leanings.