US Commerce Chief Howard Lutnick announced that President Trump will make decisions on trade deals this week, just ahead of the August 1 deadline. Negotiations with China and the European Union are still ongoing. Talks with the EU will focus on digital services, steel, and aluminum, while natural resources will remain exempt from tariffs. In two weeks, a new plan for pharmaceuticals is expected, indicating more changes in this area. Trump can set the terms for trade deals, stressing the importance of open markets, and he intends to wrap up decisions by Friday. For India, Trump needs to decide on pursuing a trade deal. This situation carries risks and uncertainties, and the discussions about financial markets are only for informational purposes.

Financial Market Opportunities

The approaching August 1 deadline for trade deals brings a lot of uncertainty to the market, creating chances with volatility instruments. The CBOE Volatility Index, or VIX, has already risen over 8% in the last five trading sessions, reaching 19.5, as traders feel more anxious before the decision. We expect this trend to continue, making long positions in VIX futures or buying call options on volatility ETFs appealing in the short term. The ongoing negotiations with the European Union put the steel and aluminum industries in the spotlight. The XME metals and mining ETF has underperformed compared to the S&P 500 by about 4% this quarter. This sets up a potential sharp move based on the outcomes of the talks. Traders might consider straddles on major steel producers to profit from significant price swings. The situation with China remains critical, as the latest data shows the U.S. trade deficit with the country grew to $28.4 billion last month. This pressure could result in a tougher stance, making put options on China-focused ETFs like FXI more attractive. On the other hand, a surprisingly positive resolution could trigger a significant rally, potentially benefiting U.S. companies with substantial revenue from mainland China.

Anticipated Pharmaceutical Plan

A decision on an Indian trade deal presents a clear opportunity. Implied volatility on front-month options for the INDA India ETF has surged to a 90-day high as traders make their bets. We believe a simple call or put spread is a defined-risk way to speculate on whether the administration will decide to pursue a deal. The upcoming plan on pharmaceuticals in two weeks is likely to create more volatility in that sector. We remember how the suggestion of drug pricing reforms in the early 2020s caused the XLV healthcare ETF to drop nearly 5% in just one week. Buying longer-dated options on major pharmaceutical companies could help capture the price movements after this announcement. Overall, Trump’s ability to set terms brings central risks, making it wise to hedge the broader market. With potential market-moving announcements expected by Friday, buying out-of-the-money put options on SPY or QQQ ETFs could act as affordable portfolio insurance, protecting against problems arising from negotiations. Create your live VT Markets account and start trading now.

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