Trump Media Stock Faces Potential Turbulence as Election Day Approaches
Traders are bracing for significant volatility in Trump Media’s stock as the U.S. elections loom, particularly amid predictions that a victory for Democratic candidate Kamala Harris could trigger a sharp decline. The stock of Trump Media (DJT.O), which has become a barometer for Donald Trump’s electoral prospects, is under close scrutiny as investors anticipate the outcome of Tuesday’s election.
The company, which operates the Truth Social platform and has launched a streaming service, has seen its stock trading become increasingly disconnected from its core business fundamentals. Experts suggest that this could lead to extreme fluctuations in stock prices following the election results. “This stock is wildly overvalued, and its economic fundamentals make no sense, even if Trump were to win,” remarked Brian Lukow, a former senior vice president at Lehman Brothers and current short seller. Lukow views Trump Media as a prime candidate for his next investment bet, especially in the event of a Harris victory.
In its most recent quarterly report, Trump Media posted a loss of $16.4 million and revenue of just $837,000, with a current market capitalization hovering around $6 billion. Lukow expressed confidence that if Harris secures a win, the stock will “crash and burn.” Conversely, he believes that if Trump prevails, his short position will look exceedingly promising.
The fluctuations in Trump Media’s stock have mirrored Trump’s rising odds in election betting markets, particularly on platforms like Polymarket, where his chances of winning surged to as high as 67%. However, this dramatic rise has raised eyebrows among social media users and betting analysts, as it has diverged significantly from traditional opinion polls that indicate a tightly contested race.
As the stock tumbled last week, so did Trump’s predicted chances, with Polymarket indicating a drop to around 54% by Sunday. Notably, there is no formal analyst coverage of Trump Media, which is primarily owned by Trump himself, holding a 57% stake valued at approximately $3.5 billion. As of Sunday, Trump’s total net worth was estimated at $5.6 billion by Forbes. Inquiries directed to the Trump campaign were redirected to Trump Media & Technology Group, which did not respond to requests for comment.
Diverse Trading Strategies Among Investors
Trump Media has cultivated a passionate following among Trump supporters, many of whom express their unwavering commitment to holding the stock long-term. Enthusiastic advocates often congregate on platforms like Reddit and Truth Social, with one prominent group dubbed $DJT featuring an image of a rocket ship launching into space.
One anonymous trader expressed confidence in Trump Media’s potential for future media acquisitions and a significant upside if Trump wins the election. Meanwhile, others see the stock as a prime opportunity for short-term gains. “It could be one of the best trades of the year,” stated Vaughn McNair, a trader based in Joliet, Illinois. McNair, formerly a moderator on the WallStreetBets Reddit forum during the GameStop saga, emphasized that his investment strategy is separate from his political beliefs. He informed his 34,000 YouTube followers that Trump Media represented the “ultimate gamma squeeze,” which can result in substantial price increases due to options trading dynamics. Following this alert, the stock surged by 236% over the following month.
As the election approaches, Trump Media’s stock has exhibited pronounced volatility. On the day of the election, trading was halted five times due to extreme price fluctuations, and the stock experienced a 27% decline in the week leading up to Election Day. According to analytics firm S3 Partners, if Trump wins, there could be an increased likelihood of a short squeeze, which occurs when rising asset prices compel short sellers to buy back shares to cover their positions.
The trading volume for Trump Media’s stock options has surged recently, frequently placing it among the most actively traded names in the options market. In the past month, an average of 300,000 DJT options contracts have exchanged hands daily, with a total options premium traded valued at approximately $2.45 billion, as reported by options analytics service Trade Alert.
Looking ahead, traders anticipate significant volatility in the stock, with options pricing indicating a potential swing of about 50% in either direction by Friday, November 8. McNair cautioned, “If Trump loses, it will be disastrous for anyone holding this stock.” The precarious nature of Trump Media’s stock highlights the intertwined relationship between politics and market dynamics as traders prepare for the potential upheaval that the election results may bring.
