Trade discussions between the US and China are set to begin in Stockholm, with aims for extensions.
by VT Markets
/
Jul 28, 2025
US-China trade talks are set to begin in Stockholm at the Rosenbad government office. The goal is to extend the current 90-day trade truce between the two countries.
Both nations want to avoid raising tariffs while working toward a comprehensive agreement. However, progress seems limited as China has shown its power by restricting rare earth mineral exports to the US.
Market Volatility Expectations
With the talks happening in Stockholm, we can expect increased market volatility. Any news, whether good or bad, could lead to quick price swings. For example, during the August 2019 tariff escalation, the VIX, which measures expected volatility, spiked over 40% in just one week. We should be ready for similar reactions.
China’s control over rare earth minerals poses a significant threat. These materials are essential for technology and defense industries, including everything from smartphones to missile guidance systems. It may be wise to consider buying protective put options on semiconductor ETFs or key tech companies with vulnerable supply chains.
The potential for a 90-day extension creates a complex situation. The immediate crisis may be avoided, but the underlying tension will still exist. This could lead to a “range-bound” market with sporadic fear spikes. In this kind of environment, strategies like selling iron condors on broad market indices can be effective, allowing us to profit when the market stays within a predicted range.
Rare Earth Export Decline
China’s official data reveals that rare earth exports already dropped 7.2% in August compared to the previous year. This is a serious concern. We can use this information to set up calendar spreads by selling short-dated options to capture the expected “status quo” premium while holding longer-dated options as protection. This strategy allows us to benefit from the current calm while guarding against any sudden issues in the talks.
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by VT Markets
Jul 28, 2025
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