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

The U.S. midterm elections will determine which party controls Congress, but for markets, the bigger question is whether the result is clear on election night. A disputed outcome—recounts, legal challenges, or delayed certification—could drag on for weeks, leaving investors to guess at the policy path ahead.

According to Kevin Muir, a trader and author of the MacroTourist newsletter, the logical response is almost too obvious to debate. He suggests buying portfolio insurance, or downside protection, and calls the move a "chip shot" given the circumstances. Such protection typically comes in the form of options strategies that gain value if major indexes fall amid a contested result.

Muir's point is not that chaos is inevitable, but that the risk is visible enough to warrant attention. Investors should watch the margins in tight races, state certification deadlines, and whether either party signals widespread legal challenges. One caveat: insurance is not free. Premiums rise as uncertainty builds, so hedging carries a cost—even if the feared scenario never materializes. Markets dislike ambiguity, and the gap between Election Day and a final outcome is precisely when that ambiguity tends to be most expensive for the unprepared.