Asian markets had a calm day with little news or data. In the foreign exchange market, the USD/JPY pair slipped slightly towards the end of the day, but there wasn’t a clear reason for this change. U.S. Commerce Secretary reported that trade talks between the U.S. and China in Stockholm might lead to a 90-day extension of their trade truce. These discussions, which began on Monday, continued into the next day. In a diplomatic move, President Trump denied Taiwan’s President a stopover in New York while heading to Central America. This decision shows Trump’s aim to maintain good relations with China, focusing on trade and geopolitical stability. In the U.S., a tragic mass shooting took place in New York City. A gunman shot and killed four people in a Manhattan office building before taking his own life. In the Asia-Pacific, stock indices saw slight declines: Australia’s S&P/ASX 200 was down 0.25%, Hong Kong’s Hang Seng dropped 1.1%, Japan’s Nikkei 225 fell by 0.9%, and the Shanghai Composite decreased by 0.1%. According to Lutnick’s insights, we expect a quick reaction in the volatility markets. If the 90-day trade truce happens, a major source of uncertainty would be lifted. This could lead to lower implied volatility across stock indices. As a result, selling options or using credit spread strategies might be profitable soon. Historically, the CBOE Volatility Index (VIX) has sharply decreased with positive U.S.-China trade news. For instance, during the “Phase One” deal discussions in late 2019, the VIX fell from above 20 to the low teens. We expect a similar, albeit more gradual, calming effect if an extension is announced. The President’s diplomatic gesture regarding Taiwan further emphasizes a desire for stability, supporting a cautiously optimistic outlook. U.S. trade with China was about $758.4 billion in 2022, so any reduction in tensions is a good sign for markets. Thus, long call options on indices like the S&P 500 or the Hang Seng could see gains from a relief rally. The decline in Asian stocks, especially in Hong Kong, might create a tactical chance ahead of the Stockholm news. Current pessimism means option prices may underestimate the chances of a trade truce. We see this as an opportunity to take positions before sentiment improves and volatility decreases. Although the tragic shooting in New York is an unfortunate event, it is unlikely to significantly influence broad market strategies. Our attention should remain on geopolitical signs, indicating a period of reduced market turbulence. The calm session suggests the market is waiting for a positive catalyst, which we believe is coming.

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