| NEW YORK
NEW YORK Investors are unprepared for the market volatility analysts say could be unleashed should French far-right leader Marine Le Pen do the unexpected and win the country's upcoming presidential election, U.S. stock options data showed.
Traders have shown little interest in betting on a spike in gyrations in U.S. stocks following the election. Near-dated options contracts on the S&P 500 Index .SPX paint a picture of calm even though a Le Pen win would be akin to the populism that brought Brexit to Britain and roiled global markets.
Complacency brought on by a long period of stock market calm and limited success in benefiting from hedges due to increasingly fleeting volatility spikes in the recent past may explain this lack of fear in the face of a major potential catalyst, options experts said.
"There is some sort of move priced in but it's not very large and in general, volatility is very muted," said Drew Forman, co-head of trading at Macro Risk Advisors in New York.
Opinion polls forecast Le Pen will do well in the first election round but lose the May 7 run-off to centrist candidate Emmanuel Macron, but a high number of undecided voters means the outcome remains unpredictable.
If Le Pen wins, policy agenda items including a French exit from the euro zone, reestablishing a national currency and slapping taxes on imports would likely fuel global market volatility, analysts said.
The U.S. stock market likely would not be immune. Depending on whether the shock of a Le Pen victory is localized or has a global spillover, the S&P 500 could decline anywhere from 0.9 percent to 10.9 percent, UBS said in a recent strategy note.
In Europe, election nerves are on display. Europe's VSTOXX volatility index .V2TX hit a four-month high on Thursday.
Still, barring some pick-up in demand for options expiring on April 24 and May 12, contracts that encompass both rounds of the election, U.S. equity options traders are expressing little fear.
S&P 500 30-day and 90-day implied volatility, gauges of how much stocks are expected to swing over the near term, are both near two-year lows and well below where they were three weeks before Britain's vote to exit the European Union in June.
Difficulties in monetizing even correct predictions have hurt hedging appetite, said Aashish Vyas, director of portfolio strategy at Durango, Colorado-based Swan Global Investments.
"Volatility is very cheap. All the metrics relative to where we were this time before Brexit are pricing in a non-event. We think that's a bit complacent," he said.
(Reporting by Saqib Iqbal Ahmed; Editing by Daniel Bases and Meredith Mazzilli)