On the second day of discussions, the US trade team aims to uphold the ongoing truce.
by VT Markets
/
Jul 29, 2025
The US and China are meeting in Stockholm for the second day to discuss trade relations. They aim to extend the current truce, which ends on August 12.
China has accepted the higher tariffs imposed by the US, while the US is wary about possible disruptions in rare earth exports. Both countries are trying to find a path that benefits them both.
Market Volatility Concerns
As the August 12th deadline nears, we expect market volatility to increase. The talks in Stockholm are crucial, and any hint of problems could shake up the market. Traders might want to consider buying protection or betting on significant price changes.
The CBOE Volatility Index (VIX) is currently around 14, but we’ve seen a more than 30% surge in weekly call option volume for mid-August expirations. This indicates that traders are preparing for a big outcome from the talks, whether it’s a relief rally or a sharp drop. We recommend holding long volatility positions during this period as a wise approach.
Rare Earth Export Concerns
We’re also closely watching rare earth exports. China controls over 90% of global rare earth processing, so any disruption could pose a serious risk to tech and defense supply chains. Buying out-of-the-money call options on rare earth producers might be a cheap yet effective hedge if negotiations go wrong.
History suggests that trade talks lead to unstable markets. During the intense 2018-2019 trade war, headlines often caused 2% swings in the Nasdaq 100 index. Therefore, we anticipate that the two weeks leading up to August 12th will be influenced more by rumors and news bites than by actual fundamentals.
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by VT Markets
Jul 29, 2025
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