China and Canada have had detailed discussions aimed at improving their trade relations and working together economically. Notable attendees included China’s chief trade negotiator Li Chenggang, Saskatchewan Premier Scott Moe, and Kody Blois, who is the Parliamentary Secretary to the Canadian Prime Minister.

Efforts to Boost Cooperation

The talks show a strong intention to enhance cooperation at both the federal and provincial levels. They covered a wide range of topics, including agriculture and energy, highlighting their desire to strengthen partnerships in various sectors. These renewed trade discussions are likely to benefit the Canadian dollar. Given that the CAD/USD exchange rate has struggled below 0.73 for most of 2025, this news could signal a turnaround. Derivative traders might want to explore call options on CAD futures, as a rise against the US dollar seems possible. Saskatchewan’s premier’s mention points specifically to agricultural products. We are particularly interested in canola and potash futures because China has been a significant buyer in the past. Earlier this year, Statistics Canada reported a 12% drop in canola exports to China. Any signs of improved relations may trigger a notable price increase. In terms of energy, this development is likely to lessen risks for Canadian oil and natural gas producers. The global energy market has been weak, with WTI crude prices dipping below $70 a barrel last month. A stronger trading relationship with China would create much-needed support for demand. Traders could consider selling out-of-the-money put options on major Canadian energy stocks to earn premium.

Impact on Market Volatility

We expect this news will also decrease market volatility in Canada. The S&P/TSX 60 Volatility Index (VIXC) has been high, but these talks point to a more stable economic forecast. This situation is favorable for strategies that profit from falling volatility, such as selling strangles on the index. However, it’s essential to remember that similar discussions have not always succeeded, especially during the difficult period from 2019 to 2023. Headlines don’t always lead to rapid policy changes, so traders should use risk-defined strategies. It may be wiser to utilize bull call spreads on relevant sector ETFs instead of buying naked calls, which can limit potential losses if the negotiations do not progress. Create your live VT Markets account and start trading now.

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