Election protection: Buy these securities to avoid short-term pain from the next president

Published Fri, Nov 4 20163:04 PM EDT

With the narrowing poll numbers increasing the chance of a Donald Trump upset, Wall Street is telling clients how to hedge against a win by the Republican presidential candidate. Citi Research told clients Friday a Trump victory could spark an immediate market sell-off of up to 5 percent as the uncertainty caused by his administration may result in slower economic growth. CNBC PRO found three election hedge ideas from Wall Street in the case of any event volatility into the election next week. The CBOE Volatility Index , or VIX, is a key measure of market expectations of near-term volatility conveyed by S & P 500 stock index option prices, according to the CBOE. Using hedge fund analytics tool Kensho, CNBC PRO analyzed the more than 60 occasions in the last decade when the VIX jumped 5 points in five days to see which ETF securities did well. Theoretically, these ETFs should work if in the lead-up to the presidential election the VIX goes up 5 points. The findings show the iShares 20+ Year Treasury Bond ETF and the Vanguard Total Bond Market ETF perform well during periods of extreme rising volatility. JPMorgan upgraded Newmont Mining to overweight from equal weight on Thursday. "We feel Newmont has lagged the sector at a time when investors should be taking another look at gold, given the increased interest in the metal in part on political uncertainty ahead of next week's election," analyst John Bridges wrote in the note to clients. The analyst said investors can use the gold miner as a hedge against increased market volatility. Jon Najarian told CNBC PRO his favorite hedge for regular investors going into the election was a call spread on the VIX. He recommended buying the VIX 18 strike calls and selling the 22 or 24 strike calls against it. "That's [called] a vertical spread. I can make a lot of money really fast if indeed ... Mr. Trump sweeps in," he said. However, the trader warned against using double or triple-levered ETFs "because I think that is dangerous for most investors." Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.

A worker at the Newmont Mining gold quarry mine west of Elko, Nevada

David Paul Morris | Bloomberg | Getty Images

With the narrowing poll numbers increasing the chance of a Donald Trump upset, Wall Street is telling clients how to hedge against a win by the Republican presidential candidate.

Citi Research told clients Friday a Trump victory could spark an immediate market sell-off of up to 5 percent as the uncertainty caused by his administration may result in slower economic growth.

CNBC PRO found three election hedge ideas from Wall Street in the case of any event volatility into the election next week.