Lutnick mentioned that the European Union (EU) wants to make a deal, and South Koreans are also eager to negotiate. He noted that the EU has been consistently targeting American tech companies. He emphasized the importance of the U.S. managing TikTok’s algorithm to address national security issues, insisting that TikTok should not be under Chinese control.

Market Opportunities

These points indicate a market that is being pulled in two different directions, which creates unique opportunities. The EU and South Korea’s interest in trade agreements suggests that multinational industrial and transport stocks may see less volatility. The trade relationship between the U.S. and the EU was valued at over $1.3 trillion in goods and services in 2023, so any official deal would be very stabilizing. On the other hand, the EU’s ongoing scrutiny of American tech sends a mixed message. We anticipate continued volatility in the tech sector, especially among large companies. This was highlighted when the EU fined Apple over €1.8 billion in March 2024, showing they are serious about their regulations. This uncertainty suggests a strategy of buying protective put options on tech-focused ETFs like the QQQ. At the same time, we might sell put options on an industrial ETF to benefit from the more positive outlook provided by potential trade deals. This approach would help us profit from the different directions these two sectors are heading.

Geopolitical Risks And Opportunities

The push to sell TikTok introduces a significant geopolitical risk that could affect the whole market. The House of Representatives recently passed a bill that could either force a sale or ban, indicating this issue is moving quickly and may provoke a strong response from China. This signals an opportunity to consider buying call options on the VIX, which is a bet on rising market fear. Looking back, the trade war with China in 2018-2019 caused the CBOE Volatility Index to go over 30 multiple times, indicating high market stress. If the current situation escalates, we could see a similar pattern, making long-volatility positions potentially very lucrative. Given the current discussions, preparing for such a spike seems wise. The mention of South Korea also opens up specific investment opportunities in sectors like semiconductors and electric vehicles, where they are important partners for the U.S. A better trade relationship could positively impact companies in those supply chains. Therefore, we might consider long-dated call options on selected semiconductor companies with strong ties to South Korea. Create your live VT Markets account and start trading now.

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