US stock markets are slowly recovering after a significant drop last Friday. This report looks at factors influencing the market, such as US-China trade tensions and recent earnings. There are concerns about the potential for 100% tariffs on Chinese goods from the US, which could spark a trade war and add port fees that impact global trade.

Federal Reserve Policy and Market Impact

The Federal Reserve’s monetary policy is a major point of interest, with expectations for rate cuts in future meetings. Mixed signals from Fed officials on how quickly they will ease monetary policy could affect market sentiment. If the Fed continues to ease policies, it might support US stocks. However, if expectations shift, this could lead to market declines. Recently, major US banks reported earnings that exceeded analysts’ expectations, which could boost market confidence. Upcoming earnings from well-known companies may also direct market trends. The S&P 500 has moved away from its all-time highs and is undergoing a correction. Technical analysis suggests a potential sideways trend, indicating the index might resist further drops but isn’t showing signs of a strong recovery yet. As of October 15, 2025, the market is in a state of uncertainty that derivatives could help manage. The main worry is the potential for 100% tariffs on Chinese imports by November 1st, creating a risk of a sharp market downturn. Traders should remember the market volatility during the 2018-2019 trade disputes and might consider buying put options on indices like the S&P 500 to protect their portfolios from a similar shock. This tension is reflected in rising market volatility, with the VIX index recently jumping to 19.5, much higher than the calm levels seen over the summer. This indicates that options premiums are increasing as traders prepare for potential large market moves. For those expecting a rise in volatility, regardless of direction, buying VIX call options or creating straddles on broad market ETFs could be a sensible strategy.

Key Federal Reserve Meeting

Looking ahead, the Federal Reserve will meet on October 29th, with expectations for a rate cut. Recent data shows annual inflation has eased to 2.8%, giving the Fed some leeway to adjust policy. Traders can use Fed Funds futures to position themselves for this possibility, but they should be cautious about any unexpectedly hawkish comments that might change market sentiment. Currently, the S&P 500 is moving sideways, trading between a key support level of 6420 and a resistance level at 6700. This well-defined range makes selling an iron condor an attractive strategy, as it could profit if the index stays within this range during the upcoming uncertainty. A clear break through either level could signal a new trend and an opportunity to exit such positions. Finally, with earnings season here, we can focus on how individual companies perform. Following strong results from major banks, upcoming reports from companies like Tesla and Netflix are expected to lead to significant price changes. Traders should consider using options strangles to take advantage of the anticipated volatility following these announcements, without needing to predict the specific direction. Create your live VT Markets account and start trading now.

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**Silver Continues Its Upward Trajectory** Silver’s prices are rising, fueled by a shortage in London’s physical market. Currently, spot prices have exceeded $52.50, marking a daily increase of over 2.5%. After hitting a high of $53.77, a slight drop yesterday paused its four-day winning streak temporarily. The tight market is worsened by low inventories in London, creating a short squeeze as demand outstrips supply. Higher borrowing costs are seen as refiners and custodians work to secure silver, which has led to a disparity between London spot prices and US Comex futures prices. Predictions indicate that silver prices will keep rising. Bank of America expects a price of $65 by 2026, while HSBC sees an average of $38.56 for 2025. The price trend shows consistent higher highs and lows, with the Relative Strength Index (RSI) cooling to 64, suggesting a brief pause in momentum. **Silver Logistics Forecast** The immediate resistance for silver prices is around $53.77, and a breakout could push prices towards $55. Investors often choose silver for its value preservation and as a hedge against inflation. Price variations are influenced by geopolitical events, interest rates, US Dollar fluctuations, and industrial demand, especially in electronics and solar industries, with silver’s trends often paralleling gold. The current market clearly favors bullish perspectives, so we should focus on long positions. The severe shortage in London is a significant factor, creating a short squeeze that makes short trades risky. Traders should consider any pullback toward the $51.50 support level as a chance to enter or increase long call options. Recent data from the London Bullion Market Association strengthens this outlook. Their October 2025 report reveals that registered silver inventories have dipped below 250 million ounces, a level not seen in over ten years. This supply crunch is coinciding with strong industrial demand, backed by the International Energy Agency’s latest report showing that solar panel installations are 30% ahead of last year’s record pace. These factors encourage using options strategies like bull call spreads to aim for a rise towards the $55 mark. The overall economic situation is also supportive. The September 2025 US Consumer Price Index registered a higher-than-expected 3.8%, decreasing the chances of Federal Reserve interest rate hikes before 2026. A similar scenario occurred during a retail-led squeeze in early 2021, but that time lacked the significant physical shortage we see now. This makes the ongoing upward trend more robust and sustainable. The cooling of the Relative Strength Index from overbought levels does not signal a peak; instead, it suggests a healthy consolidation before another potential rise. This brief pause presents an opportunity to prepare for a breakout above the all-time high near $53.77. Selling out-of-the-money put options with strikes near the $50.00 psychological support could be an effective way to earn premiums while waiting for the next advance. Create your live VT Markets account and start trading now.

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US Treasury Secretary Scott Bessent stated that China plans to introduce new trade barriers. He stressed that the US does not want to escalate tensions or separate from China. Bessent highlighted that the US has advantages due to its supply of semiconductors, aircraft engines, and essential minerals for China’s supply chain. The goal is to revitalize five to seven key industries, including shipbuilding and rare earths.

Efforts to Engage

There are ongoing efforts to connect with Chinese officials, including a possible meeting between President Trump and Xi Jinping. This relationship is seen as crucial in avoiding further escalation. Bessent mentioned that stock market changes will not affect trade talks with China. He also pointed out the need for a clear industrial policy when dealing with non-market economies like China. After Bessent’s comments, the US Dollar Index slightly recovered but still fell 0.07% for the day, ending at 98.96. The mixed signals from the Treasury, balancing toughness with a willingness to engage, suggest that market volatility may rise in the coming weeks. While there is no intention to decouple from China, there are various measures that can be taken. This uncertainty prompts traders to consider buying protection, especially since the CBOE Volatility Index (VIX) has increased by over 15% in the last month, trading above 19.

Market Reactions

Bessent’s clear statement that stock market performance won’t influence negotiations serves as a warning to long equity investors. This indicates that the administration is prepared to accept market declines to achieve its trade policy objectives. Thus, using put options on key indices like the S&P 500 and Nasdaq 100 to protect portfolios is a wise move. Certain sectors are being highlighted, leading to distinct winners and losers. Semiconductors and aircraft engines are being leveraged, possibly putting downward pressure on related stocks like those in the SOXX ETF, which has already lagged the broader market by 6% this quarter. In contrast, investments in domestic companies involved in shipbuilding and rare earths may benefit from efforts to boost those industries. In the currency markets, this stance supports a stronger US Dollar, evident in the DXY hovering around 99.00. This is likely to put further strain on the Chinese Yuan, with the USD/CNH recently crossing the significant 7.45 mark for the first time this year. We may also see weakness in currencies sensitive to China’s economic performance, such as the Australian Dollar. Reflecting on this from October 2025, the current situation resembles the headline-driven market fluctuations we witnessed during the 2018-2019 trade disputes. At that time, markets reacted strongly to negotiation news and presidential tweets. Traders should be prepared for a similar environment and stay flexible to adjust to sudden changes in policy or developments from the planned meeting between the two presidents. Create your live VT Markets account and start trading now.

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Federal Reserve Chair Powell recently spoke to the National Association for Business Economics and noted that the economic outlook remains the same since September. The Fed lowered interest rates by 25 basis points at that time, primarily to address labor market risks stemming from supply-side issues. The “dot plot” indicates a median expectation of two more interest rate cuts this year, but most people do not expect any additional reductions. Market predictions, however, align with plans to adjust the Fed’s base case, suggesting cuts in both October and December. Overall, a reduction of 75 basis points over the next year is anticipated, occurring at a rate of 25 basis points each quarter. This would lead to a Fed funds rate upper limit of 3.00% by September 2026.

Policy Outlook and Inflation Risks

The current policy is seen as less strict than the Federal Open Market Committee believes, raising the chance of inflation risks due to early easing measures. Although the AI boom is less sensitive to interest rates, it’s becoming more financed by debt and could expand with lower rates. Planned fiscal easing next year may add to demand-driven inflation. Tariff-induced inflation will also play a role, possibly affecting future Fed forecasts. Revised inflation and growth estimates are expected in the upcoming Global Outlook. With the Federal Reserve signaling rate cuts in both October and December, the path for policy appears straightforward. The latest jobs report for September 2025 showed a slowing labor market, with payrolls increasing by only 150,000 and unemployment rising to 4.1%, justifying the Fed’s stance. Traders should keep positions that benefit from falling short-term interest rates in the near future. Since the market has already accounted for these two 25 basis point cuts, straightforward trades in Fed Funds or SOFR futures may offer limited gains. Instead, traders might explore options strategies that take advantage of this high level of certainty. For instance, selling out-of-the-money puts on short-term rate futures could provide a way to earn premiums as the market anticipates the Fed’s expected cuts. However, we believe the main risk is that the Fed might be making a policy error by concentrating on the labor market while ignoring inflation. The Consumer Price Index report for September 2025 showed a higher-than-expected inflation rate of 3.8%, with core inflation stubbornly over 4%. This situation resembles what occurred in 2021 when the Fed initially overlooked rising inflation, necessitating aggressive tightening later.

Strategies for Potential Market Scenarios

This cycle of early easing is taking place as an AI-driven investment boom becomes increasingly reliant on debt, which will be further boosted by lower rates. Recent industry analysis shows that corporate debt issuance for AI infrastructure has increased by 30% compared to last year. This, combined with expected fiscal stimulus, is creating significant pressure for demand-driven inflation. Given this outlook, a yield curve steepening trade could be profitable. This strategy involves using derivatives to bet that long-term rates will rise due to inflation concerns, even as the Fed cuts short-term rates. Taking a long position in 10-year Treasury note futures while shorting 2-year futures would directly benefit from this divergence. For a longer-term strategy, traders should consider buying derivatives that could profit if the Fed is forced to abruptly change its policy in 2026. Purchasing call options on SOFR futures for mid-2026 delivery is a relatively low-cost way to hedge against this potential risk. This positions the trader for the chance that the current easing pathway will eventually create an inflation problem that requires a more aggressive response later on. Create your live VT Markets account and start trading now.

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The Pound Sterling (GBP) has bounced back to around 1.3370 against the US Dollar (USD) during European trading. This recovery comes after a recent dip in the US Dollar, prompted by concerns from Federal Reserve officials, including Jerome Powell, regarding the labor market. Analysts at UOB Group predict that GBP/USD will likely stay within the range of 1.3290 to 1.3365. Although the downward trend has slowed, there is still a chance that GBP might drop further to 1.3200.

UK Data and Bank of England Stance

Recent UK data have sent mixed signals, and the Bank of England’s position remains unclear. The Pound’s struggles have affected its value against other major currencies, while EUR/GBP saw its biggest rise since September 16. The likelihood of a rate cut by the Bank of England has increased from 20% to 40% over the last three days, as the 2-year Gilt yield fell by 5 basis points. As of October 15, 2025, the Pound is in a tough spot, influenced by a weaker US Dollar and growing worries about the UK economy. The recent drop in the US Dollar, following the Federal Reserve’s comments on the labor market, has temporarily boosted GBP/USD. This creates a mixed environment where neither currency holds a distinct advantage. We expect GBP/USD to trade in a tight range of 1.3290 to 1.3365 in the coming weeks. The US Non-Farm Payrolls report from early October, which showed only 155,000 job gains compared to the expected 200,000, supports the view that the Federal Reserve will be less aggressive. This should help keep GBP/USD near the low 1.33s for the time being.

Sterling’s Limited Upside

However, the potential for Sterling to rise seems limited due to increasing speculation about a Bank of England rate cut later this year. Last week’s UK inflation data showed an unexpected drop in CPI to 2.2%, and slowing Q3 GDP growth has pushed the market’s expected chance of a rate cut up to 40%. This suggests that any rallies towards the 1.3370 level might face selling pressure. For traders using derivatives, this outlook favors strategies that benefit from low volatility, such as selling strangles with strikes set outside the 1.3290-1.3365 range. Given the risk of a sharper drop in GBP, holding a slight bearish position could be wise. Buying cheaper, out-of-the-money puts below 1.3200 could serve as a good hedge, especially since current low implied volatility makes these options affordable. This situation feels reminiscent of the volatile market conditions we encountered in the latter half of 2024, when central bank policies were also diverging. During that time, range-trading strategies were effective until a clear trend developed. We should remain cautious about any potential breakout, but for now, it seems the most likely path is sideways. Create your live VT Markets account and start trading now.

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The Japanese Yen (JPY) rose by 0.3% against the US Dollar (USD), maintaining its position among G10 currencies and building on Friday’s positive trend. This comes after the Yen hit an 8-month low, as yield spreads tighten due mainly to cautious expectations from the Federal Reserve, while the outlook from the Bank of Japan remains steady. Market sentiment plays a strong role in the Yen’s performance. Its strength is seen in the relationship with risk, while there is some weakness in spread correlations. A recent vote by the Liberal Democratic Party (LDP) in Japan did not change expectations for the Bank of Japan, which adds more support to the Yen.

European And American Currency Movements

The EUR/USD pair held above 1.1600, supported by a weaker US Dollar amidst trade tensions. The GBP/USD climbed above 1.3400 but later pulled back. Its future movements will likely depend on comments from the Federal Reserve and the Bank of England. Gold prices stayed steady around $4,200 per troy ounce, boosted by global tensions and worries surrounding US-China trade relations. Bitcoin faced resistance in its recovery due to ongoing trade issues and a potential US government shutdown, with prices below $112,500. Lido DAO stabilized above $1.00 after the launch of its Lido V3 testnet, which aims to upgrade important contracts. The IMF slightly upgraded its global economic growth forecasts, despite lingering uncertainty. The Yen has made a strong comeback from its multi-month lows against the dollar. This strength connects directly to a softer outlook for the Federal Reserve, especially after last week’s US core inflation data for September, which showed a decrease to 2.8%. This trend continues from earlier in the year and is the key factor driving the currency markets.

Yield Spread Dynamics

A crucial support factor comes from the narrowing yield spreads between US Treasuries and Japanese Government Bonds. The US 10-year yield recently dropped to 3.95% from its high in August 2025, while the Bank of Japan maintains its ultra-loose policy, indicating no immediate changes. This situation reduces the appeal of carry trades that previously favored the dollar throughout 2024. Looking ahead, traders may want to consider buying USD/JPY put options to prepare for further declines. The recent drop below the 150 level—an important psychological support—suggests momentum could push the pair lower to the 147-148 range. Options expiring in November or December 2025 could capture this short-term movement. In addition to fundamentals, market sentiment is now a main factor, as the Yen is regaining its traditional status as a safe haven. The CBOE VIX index has risen to 22, indicating the ‘acute’ uncertainty described in the IMF’s latest World Economic Outlook. This risk-averse climate provides strong support for the Yen, regardless of interest rate differences. Create your live VT Markets account and start trading now.

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The Pound Sterling (GBP) has increased by 0.2% against the US Dollar (USD), making it a moderate performer among G10 currencies. This rise is mainly due to a weaker USD, not any positive changes in the UK economy.

Market Fundamentals For The Pound

The market fundamentals for the Pound are getting worse, indicated by a decline in UK-US spreads that had recently hit two-year highs. Investors are adjusting their expectations, anticipating a more cautious Bank of England due to disappointing labour market data from the UK. Governor Bailey has recognized the weakness in the UK labour market while also noting above-target inflation. Markets now expect a nearly full 0.25% interest rate cut by February, an increase of about 10 basis points just in the past week. The Relative Strength Index (RSI) is improving from bearish levels and moving towards the neutral level of 50. The GBP/USD pair has support in the mid-1.32 range, with potential resistance near 1.34 and the 50-day moving average at 1.3476. The short-term outlook suggests it will likely trade between 1.33 and 1.34. As of October 15, 2025, the British Pound is seeing a slight rise against the dollar, but this may be misleading. This change is more about the recent weakness of the US dollar, following soft retail sales data, than any positive developments in the UK economy.

UK Economic Challenges

The UK’s economic situation is declining, highlighted by a disappointing jobs report showing unemployment rising to 4.5%. This has led us to reassess the Bank of England’s direction, as markets are now expecting a full 0.25% interest rate cut by February 2026. Governor Bailey is clearly worried about the labour market, even as inflation remains high at 3.1%, well above the 2% target. Given this shift from the central bank, we see opportunities for further Pound weakness. For GBP/USD, selling during rallies towards the 1.34 level or using put options to bet on a drop below 1.33 seems like a solid strategy in the coming weeks. Resistance near the 50-day moving average of 1.3476 is expected to be strong. This weakness in the UK economy is occurring amid global economic uncertainty, as mentioned in a recent IMF report. This indicates that volatility in major indices might increase, making options strategies that benefit from price movements, like long straddles on the FTSE 100, potentially profitable. The pace of global growth continues to be slow, which may put pressure on riskier assets. The Bank of England now faces the challenge of managing a weak labour market while dealing with high inflation, similar to the dilemmas central banks encountered in 2022-2023. History shows that when worries about growth outweigh inflation concerns, central banks typically lower rates, which is usually bad for their currency. We are starting to see this shift in market expectations now. Create your live VT Markets account and start trading now.

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The Euro (EUR) has risen slightly by 0.2% against the US Dollar (USD), but it is still lagging behind most G10 currencies. This is happening amidst a general weakness of the USD, according to Scotiabank’s Chief FX Strategists. French politics are currently capturing market attention, especially with a confidence vote approaching. While industrial production in the Euro area has exceeded expectations, it did continue to decline in August. Meanwhile, France’s final Consumer Price Index (CPI) remained steady at 1.2% year-on-year. The Euro’s direction is now more influenced by political sentiment in France. Changes in EUR/spread correlations and stronger ties to 3-month risk reversals have been observed.

Sentiment And Political Concerns

Sentiment has slightly improved, with a small premium for EUR calls over puts. There has been some relief following French Prime Minister Lecornu’s successful negotiations with the Socialist Party ahead of the planned confidence vote from Marine Le Pen. The yield spread between France and Germany for 10 years has narrowed significantly, and may continue to be monitored due to Socialist Party backing for delaying the 2023 pension reform. The RSI, currently moderately bearish, is approaching neutral at 50, indicating a slow recovery for the Euro from the mid-1.15 range. Although it has surpassed a July trendline, the Euro now faces some congestion. It remains within a near-term range of 1.1580 to 1.1680, with no clear movement beyond the 50-day mark at 1.1691. The Euro is seeing a modest rise. However, it’s essential to recognize that sentiment, particularly from French politics, has become a more critical factor than economic data alone. The past year’s focus on the French confidence vote and pension reforms highlights this point. Currently, the EUR/USD is trading around 1.1250, which is quite different from the 1.16 levels previously discussed. With new debates over the French budget making headlines, the France-Germany 10-year yield spread has widened again, reaching 65 basis points this week after tightening significantly during the summer of 2025. This suggests that buying short-dated straddles or strangles on EUR/USD could be a smart way to trade the anticipated increase in volatility. Similar spread-widening occurred in late 2023 before budget negotiations, resulting in a 15% spike in one-month implied volatility.

Options Market Dynamics

In the options market, the dynamics have changed from what we previously observed. Currently, 3-month risk reversals display a clear preference for EUR puts, trading at a -0.5 delta. This indicates that traders are paying more for downside protection. Those who think this pessimism is excessive could consider selling out-of-the-money put options to earn premium. Though the earlier range between 1.1580 and 1.1680 is now a memory, the idea of range-bound trading still applies. We observe strong technical congestion between 1.1150 and 1.1300, with the 50-day moving average acting as resistance at 1.1280. An iron condor options strategy—selling a call spread above 1.1300 and a put spread below 1.1150—may be a good way to profit if the currency pair remains within this channel. Create your live VT Markets account and start trading now.

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The Canadian Dollar (CAD) is holding steady in low trading conditions. Stocks are stabilizing, and market volatility is slightly decreasing, as shown by the VIX dropping below 20. This brings some relief to the CAD, while the US Dollar (USD) is experiencing a general decline. In the short term, external factors mainly influence the CAD, as economic signals are unclear. The Bank of Canada’s Senior Deputy Governor, Rogers, has called for initiatives to boost domestic productivity.

Technical Analysis

The USD has gained recent ground, positioning itself above the anticipated equilibrium rate of 1.3783, and currently holding about two standard deviations above fair value estimates. USDCAD reached a minor peak of 1.4080 yesterday, which now serves as resistance. The intraday chart reveals a bearish outside range signal, whereas the daily chart shows a bearish “shooting star” candle for the session. Although the trend favors the USD, it seems technically overbought according to the daily chart. Initial support levels for the USD are found at 1.3970/75 and 1.3930. Since the US dollar appears overbought, the recent rise to 1.4080 may signal a short-term peak. Bearish indicators like the “shooting star” candle indicate that momentum is waning, presenting an opportunity for traders anticipating a reversal. The Canadian dollar’s significant undervaluation is increasingly evident, especially as recent fundamental changes support the currency. Data from last week revealed that WTI crude oil prices are stabilizing above $92 per barrel, which enhances Canada’s trade terms. This strength in commodities was missing during the loonie’s earlier weakness in 2025.

Domestic Economic Picture

On the domestic front, Canada’s economic situation is stabilizing, reducing the Bank of Canada’s need to lag behind other central banks. The latest September 2025 data showed core inflation holding steady at 2.2%, well within the BoC’s target range. This lowers the chances of rate cuts and strengthens the currency’s foundation. In contrast, recent US data suggests a possible slowdown, which could weaken the US dollar. The latest Non-Farm Payrolls report added only 160,000 jobs, falling short of forecasts, and led markets to consider a higher likelihood of a Federal Reserve rate cut in early 2026. This potential policy divergence could exert downward pressure on the USD/CAD pair. As a result, we see value in derivative strategies that capitalize on a decline in the USD/CAD exchange rate, such as buying put options with strike prices below the 1.3930 support level. This situation recalls the late 2022 market when an overbought USD peaked near 1.39 before correcting lower in the following months. A gradual move back towards the pair’s estimated fair value of 1.3783 seems likely in the weeks ahead. Create your live VT Markets account and start trading now.

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How Elliott Wave Theory Affects Trading Strategies

The analysis shows that $GOOGL has support against its lows from June 2025, suggesting that traders should think about buying during price dips. It’s wise to keep an eye on the $260 – 270 range as the next target. Using Elliott Wave Theory helps traders predict future market movements and manage risk during volatile times. Silver prices have increased due to safe-haven demand amid tensions between the US and China, along with speculation about Federal Reserve rate cuts. The GBP/USD has risen above 1.3400 because of pressure on the US dollar, while Gold remains steady at $4,200 per ounce. Bitcoin is struggling to maintain its rebound, dropping below $112,500 due to macroeconomic challenges. In the meantime, Lido DAO is recovering above $1.00 after the Lido V3 testnet launch.

Preparing for a Weaker Dollar

With the Federal Reserve showing a softer stance and renewed US-China trade tensions, we expect continued weakness in the US Dollar. Futures markets are pricing in an over 80% chance of a rate cut by the end of 2025, especially since the September CPI report indicated slowing core inflation. This situation favors strategies that benefit from a weaker dollar. We should aim for gains in currency pairs like EUR/USD and GBP/USD. With the Euro climbing above 1.16, its highest resistance level since early 2022, buying call options or bull call spreads is a good idea. Likewise, with Sterling above 1.34, there is potential for more upside, and we would consider similar bullish strategies. In the stock market, Alphabet ($GOOGL) seems to have found support in the $223-$234 range, creating a good buying opportunity. The Elliott Wave structure indicates that the corrective phase has ended, with a potential move towards the $260-$270 area next. We suggest selling cash-secured puts at current support levels or buying call options for the upcoming months. Gold’s strength at around $4,200 per ounce shows strong safe-haven demand that we expect to continue. This price represents a significant increase from the 2023 consolidation, and recent ETF inflow data confirms strong interest from institutions. We should keep a bullish stance on gold through futures or by buying call options. The potential for a US government shutdown and ongoing trade disputes is creating considerable uncertainty. This environment suggests that market volatility may rise in the weeks ahead. Therefore, we should think about adding protection to our portfolio, like buying VIX futures or VIX call options, to guard against sudden market drops. Create your live VT Markets account and start trading now.

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