U.S. President Donald Trump has urged the European Union to impose tariffs of up to 100% on goods from China and India, according to officials from the U.S. and the EU. This move aims to apply pressure on Russian President Vladimir Putin by targeting two major oil consumers. Washington plans to impose similar tariffs if the EU agrees, suggesting a shift from the EU’s usual reliance on sanctions against Russia. Trump has been critical of Beijing and New Delhi for helping Russia’s economy by purchasing crude oil.

Increasing Tariffs

Earlier this year, Trump raised tariffs on India, but the most severe measures have not yet been enacted. He encouraged Europe to lessen its dependence on Russian energy while hinting at better U.S.-India trade relations, mentioning collaboration with Prime Minister Narendra Modi to break down trade barriers. Following this tariff threat, we expect increased market volatility. The VIX, which is currently near 19, could jump above 30, similar to levels during trade tensions in 2018 and 2019. Traders might consider buying call options on the VIX or volatility-linked ETFs to take advantage of this anticipated rise in uncertainty. Global equity indices are likely to decline if the EU pursues this proposal. We recommend buying put options on the S&P 500, Euro Stoxx 50, and emerging market ETFs that focus on China and India. This situation echoes late 2018 when fears led to a nearly 20% drop in the S&P 500. The energy markets may see a split in crude oil pricing. We expect Russian Urals crude prices to fall sharply, while Brent and WTI futures may rise as China and India search for new suppliers. This mirrors the market behavior following the 2022 sanctions, when Urals crude was discounted by over $30 per barrel compared to Brent.

Impact on Global Markets

In currency markets, we anticipate a shift toward safety that will strengthen the U.S. dollar. The Chinese yuan and Indian rupee are likely to face significant pressure, making long positions in USD/CNH and USD/INR appealing. The Euro may also weaken against the dollar due to the economic impact on European exporters, so we will be looking for chances to short the EUR/USD pair. This trade conflict will also affect industrial commodities and global shipping. We expect copper prices to drop, which serves as an important indicator of industrial health; shorting copper futures could be a smart move. Similarly, global shipping and logistics companies will likely experience reduced volumes, making put options on major shipping ETFs a wise hedge against a slowdown in world trade. Create your live VT Markets account and start trading now.

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Japanese manufacturers’ confidence reached its highest level in over three years in September after a tariff agreement with Washington in July. The Reuters Tankan survey showed the manufacturers’ index rose to +13 from +9 in August, marking a third monthly increase. However, expectations suggest a slight decrease to +11 by December. The auto and transport machinery sector saw the most growth, with its index hitting 33 due to stable overseas orders, even with weak domestic output. On the other hand, sectors like textiles, oil refining, and precision machinery voiced concerns about slow orders and lingering tariff effects.

Improvement in the Non-Manufacturing Sector

In September, the non-manufacturing index climbed to +27 from +24 in August. The real estate, retail, and transport sectors all improved. Meanwhile, wholesalers and IT firms faced tough conditions, and the index is expected to remain steady at +27 by December. Japan’s economy has stayed strong amid global trade uncertainty, backed by solid consumption, illustrated by a 2.2% annualized GDP growth in Q2. This stability stems from domestic factors, even as global trade tensions continue to be a challenge. With manufacturer confidence at its highest since August 2022, it is a good time to consider buying near-term call options on the Nikkei 225. The index has risen over 4% in the past month, currently trading near 42,500. This positive momentum, fueled by strong sentiment, presents a clear opportunity for bullish positions in the upcoming weeks. The auto sector shows remarkable strength, suggesting that we should focus on this area. Long positions through futures or call options on major automakers appear attractive, especially as companies have increased profit forecasts following the US trade deal. Historically, when the auto sector leads a Tankan improvement, as it did in late 2023, it tends to outperform the wider market in the following quarter.

Investment Strategy Based on Sector Performance

We can create pairs trades based on the clear differences shown in the report. We should buy transport and machinery stocks while simultaneously purchasing put options on weaker sectors like oil refining and precision machinery. This approach shields us from large market swings while allowing us to benefit from the performance gap between strong and weak industries. The steady growth in the non-manufacturing index, especially in retail, suggests robust domestic consumption. This supports the strong 2.2% GDP growth we observed in the second quarter. Derivatives linked to domestic retail ETFs could offer a stable, secondary long position to complement the export-driven auto trade. However, we must keep a close eye on the yen, which has been trading closely around 152 to the dollar. With core inflation remaining above 2% for over a year, any aggressive signals from the Bank of Japan could strengthen the yen, posing challenges for our exporter positions. Purchasing some out-of-the-money puts on USD/JPY could provide a cost-effective hedge against this risk. The prediction of a slight drop in manufacturer confidence by December suggests that this upward trend may stabilize. This indicates selling volatility for expirations in the next one to two months, but possibly buying volatility further out. We saw a similar trend in 2022, where a strong third quarter led to increased uncertainty and volatility as we approached year-end. Create your live VT Markets account and start trading now.

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Oracle expects its Oracle Cloud Infrastructure business to generate over $500 billion in booked revenue. The company anticipates signing several multi-billion-dollar clients soon. Oracle highlights the smooth integration for customers, which allows them to connect all databases to advanced AI models like ChatGPT, Gemini, and Grok. These AI models are uniquely available in the Oracle Cloud environment.

Stock Surge

After this news, Oracle’s stock jumped by 27% in after-hours trading. This sharp 27% increase has caused implied volatility to reach multi-year highs. As a result, purchasing basic calls or puts has become very costly. We suggest that traders should not chase this initial jump and should instead focus on selling options to take advantage of this inflated premium. With options being expensive, we see a chance to sell out-of-the-money put credit spreads that expire in the next three to six weeks. This strategy benefits if the stock remains above a certain level, allowing us to earn premium as volatility decreases. Historical data from similar earnings surges in the tech sector, like those seen with NVIDIA throughout 2024, often show a period of sideways trading after the initial jump. For those who are more positive about the stock, long-dated call debit spreads offer a more cost-efficient way to gain from further gains. This method reduces upfront cash needed and lessens the impact of volatility if the stock’s momentum slows. The company’s expectation of signing more multi-billion-dollar deals suggests this momentum may continue beyond the initial announcement.

Competitive Market

It’s important to consider that, as of mid-2025, Oracle’s cloud market share is still under 5%. This is significantly less than market leaders Amazon Web Services and Microsoft Azure, which together hold over 55% of the global market. This tough competition means capturing that projected $500 billion in revenue will be challenging. This significant news comes as the Federal Reserve has maintained interest rates at 3.75% for the last two quarters, creating a steady but cautious environment for stocks. Meanwhile, U.S. unemployment rose slightly to 4.1% last month, a figure we are monitoring closely. Any changes in this stable economic setting could dampen enthusiasm for Oracle’s ambitious growth plans. Create your live VT Markets account and start trading now.

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Conflicting Pressures

The bank highlights that the Fed is facing mixed pressures from high inflation and rising unemployment. They expect a slow easing cycle to reduce the risk of inflation caused by tariffs while handling political issues during an election year. NAB states that the uncertainty about interest rates is “wider than normal.” As of September 9, 2025, it’s likely that the Federal Reserve will announce its first 25 basis point rate cut this month. The August job report showed unemployment rising to 4.2%, indicating that risks in the labor market are growing. This shifts the focus toward preparing for lower short-term rates in the upcoming weeks. However, inflation is still a concern, with the last Consumer Price Index (CPI) reading at a high 3.6%. This conflict means more uncertainty for the Fed, presenting opportunities in volatility markets. It’s important to explore strategies that can take advantage of price swings, not just market direction, as we await the Fed’s decision amidst this mixed information. For interest rate traders, this means considering options on SOFR futures instead of holding direct futures. Additionally, buying calls or call spreads on Treasury futures could effectively position them for a dovish policy change. These trades provide potential gains if a rate cut happens while minimizing risks if the Fed hesitates due to stubborn inflation.

Equity Traders Strategy

Equity derivative traders should expect a possible market rally following a rate cut announcement, but they must also recognize the underlying economic weaknesses driving this action. We are using options on the S&P 500 to prepare, while also buying VIX calls as a safety measure. This combined approach protects against the chance that the market focuses more on a slowing economy rather than the lower borrowing costs. This situation is reminiscent of the “insurance cuts” the Fed implemented in 2019 to counter a slowing global economy. At that time, the market rallied after the policy shift. We anticipate a similar short-term reaction now, but the political factors of an election year add unpredictability. Looking ahead, there’s an expectation of a full easing cycle totaling 125 basis points through 2026. Therefore, traders should also consider longer-term derivatives that reflect this sequence of rate cuts. Options on futures set for mid-2026 could provide value, as they capture the expected decrease in the Fed funds rate over time. Create your live VT Markets account and start trading now.

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Barclays has cut its Brent crude oil forecast for 2026 by $4, bringing it to $66 per barrel. This change is based on the belief that OPEC+ will completely end its voluntary supply cuts by September 2026. The bank noted that OPEC+ has recently decided to raise the production target for October by 137,000 barrels per day. This is seen as the first step in reversing the 1.66 million barrels per day cuts made in May 2023, with a potential full return to previous levels in a year.

Gradual Unwind Pace

Barclays indicated that the pace of this reduction is slower than expected. Even with the cautious increase, strong spot market fundamentals and a significant valuation difference continue to lead Barclays to have a positive outlook on oil prices since early July. The long-term forecast for Brent crude up to 2026 is now gradually declining, with estimates moving toward the mid-$60s. This is mainly due to the expectation that OPEC+ will slowly add more supply back to the market over the next year. Their plan to eliminate the voluntary cuts from May 2023 indicates a better-supplied market in the future. In the short term, however, there are reasons to believe prices will stay strong. The recent choice to increase October’s output targets was modest, suggesting that the pace of supply recovery will be slower than many expected. This cautious approach supports prices in the near term. Current fundamentals in the physical market are robust, which helps explain the difference between short and long-term views. For example, last week’s EIA report showed an unexpected drop in U.S. crude inventories by 3.2 million barrels, despite expectations for a build. China’s crude imports for August also remained strong at over 11 million barrels per day, indicating healthy demand.

Compelling Market Structure

This creates an attractive market for traders, with near-term contracts likely to perform better than long-dated ones. Strategies that take advantage of this widening gap, like calendar spreads, could be beneficial in the coming weeks. The current market tightness is keeping immediate prices high, even as the outlook for 2026 softens. OPEC+’s measured strategy is not new; a similar approach was seen from 2021 to 2022. The group managed the return of production carefully then, which supported prices for a long time. Their current cautiousness suggests they want to maintain the market balance they have worked hard to achieve. Create your live VT Markets account and start trading now.

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The U.S. economy seems to be slowing down, according to a recent report from the Labor Department. They revised the growth estimate for nonfarm payrolls through March 2025, cutting it by 911,000 jobs. This is the largest change in more than 20 years and falls short of Wall Street’s expectations. Fewer jobs have been created than previously thought, raising alarms about the economy’s health. While many Americans are still working and spending, overall confidence may be waning.

Mixed Economic Signals

Economic signals are mixed. Household spending is slowing down, but corporate profits remain steady. Jamie Dimon expects the Federal Reserve to cut rates soon, but he doubts it will significantly change the economy’s direction. This major revision in job numbers shows the economy is weaker than we believed, bringing more uncertainty. We should prepare for increased market volatility in the coming weeks. Traders might want to buy call options on the VIX or other volatility products to guard against, and benefit from, larger market fluctuations. Given the severity of this news, taking a defensive, bearish approach to stocks may be wise for now. The job revision of 911,000 is nearly three times larger than a revision made in August 2023, indicating a serious economic error. We should consider buying put options on key indices like the S&P 500 and the Nasdaq 100 to protect our existing long positions. We are noticing signs of consumer stress, even though corporate profits are stable for the time being. Historically, sharp drops in the University of Michigan’s Consumer Sentiment Index have led to poor performance in consumer discretionary stocks. Therefore, we might look into buying puts on consumer-focused ETFs to capitalize on the weakest sector of the economy.

Upcoming Federal Reserve Rate Cuts

A rate cut from the Federal Reserve seems unavoidable, but it probably won’t solve all our issues. This situation reminds us of the Fed’s cuts in late 2007, which didn’t prevent a slowdown because the underlying issues were too serious. We can prepare for this by using derivatives that gain from falling interest rates, such as call options on long-term Treasury bond ETFs. Create your live VT Markets account and start trading now.

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Negotiations between the United States and India on trade issues are still ongoing. Donald Trump is optimistic about reaching a successful agreement with Prime Minister Modi. At the same time, Trump has urged the European Union to impose 100% tariffs on India and China. He believes this will pressure Putin, based on earlier reports.

Market Uncertainty Amidst Conflicting Signals

We are seeing mixed signals that create uncertainty in the market, affecting options pricing. The positive tone from ongoing discussions is countered by the threat of heavy tariffs, suggesting that volatility in Indian assets is likely. Traders should pay less attention to trends and more to the size of price movements. This situation indicates that we should prepare for increased volatility. The India VIX, a popular measure of market fear, has already risen 4% to 19.2 in overnight trading, and we expect it might reach the highs of around 25 we saw earlier this year. This echoes the trade disputes from 2018-2019, where buying options straddles on the Nifty 50 index was profitable, regardless of how policies turned out. The Indian Rupee is also important for trading strategies. The implied volatility on one-month USD/INR options has spiked to 9%, up from the quarterly average of 6.5%, as the market anticipates a wider trading range. We should think about taking long positions on USD calls to protect against or speculate on a weaker rupee if tariffs gain more attention.

Sector Vulnerability and EU Involvement

We also need to look at certain sectors that heavily rely on exports to the United States and Europe. Indian IT and pharmaceutical companies, which make up nearly 60% of India’s exports to the US, are especially at risk. Buying protective put options on key companies in the Nifty IT index could be a smart move in the near future. The push for EU involvement adds another layer, which may also affect European stocks. We saw that trade tensions between the US and Europe in 2022 led to sharp changes in German auto and industrial shares. Therefore, traders might consider buying puts on European index ETFs as a hedge against broader global trade issues. Create your live VT Markets account and start trading now.

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Chile’s central bank has kept the benchmark interest rate steady at 4.75%, and this decision was agreed upon by all members. Global trade tensions continue to create uncertainty, affecting the worldwide economy.

Risk of Persistent Inflation

The bank stated that they need more information to understand the risk of ongoing inflation before adjusting the rate to its neutral level. Core inflation is expected to be higher over the next year than previously predicted in June. The decision to maintain the 4.75% rate shows a cautious approach rather than a move toward easing. Markets had anticipated a rate cut by the end of the year, a belief that now seems too optimistic due to the bank’s concerns about persistent inflation. This indicates that short-term interest rate swaps might need to be adjusted upward in the coming weeks. Recent data for August 2025 shows inflation at 0.5% month-over-month, significantly higher than the 0.3% forecast. The bank’s revised core inflation forecast reflects this trend. We recall the global inflation surge from 2022 to 2023, and the bank is clearly determined not to make the mistake of easing too soon.

Currency and Economic Outlook

For currency traders, this cautious decision makes the Chilean Peso (CLP) more appealing, especially for carry trades. We expect the CLP to strengthen against currencies from central banks with a more relaxed stance, such as the US dollar. Buying CLP call options could be a smart strategy to take advantage of potential gains while controlling risk. The mention of external uncertainties is important, especially as recent manufacturing PMI data from China has fallen to 49.8. Since China is Chile’s main copper export market, any slowdown in China directly affects Chile’s economy and corporate earnings. The combination of higher local rates lasting longer and risks from external demand suggests a careful approach to Chilean stocks. This makes put options on the IPSA index a worthwhile hedging strategy. Create your live VT Markets account and start trading now.

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Positioning for Volatility

The US Supreme Court will quickly review the tariffs from Trump’s presidency starting in November. Until they make a decision, the tariffs will remain in place. This case centers on Trump’s appeal against a federal court ruling that stated the tariffs went beyond his presidential power. The Supreme Court’s hearing in November will consider these arguments. With the Supreme Court’s decision still two months away, we have a period of uncertainty, which is where we excel. The ongoing tariffs create a safety net, but the real opportunity lies in the volatility we expect. We recommend buying VIX calls or VIX futures for late October and November, as the market will anticipate big changes as the hearing dates get closer. This news puts pressure on industrial and manufacturing sectors that depend on global supply chains. We should create option strategies using ETFs like XLI (Industrial Select Sector SPDR Fund) and specific companies like Caterpillar, which felt the impact of the trade war in 2018 and 2019. Using straddles or strangles allows us to benefit from significant price movements in either direction without needing to predict the court’s outcome. We also need to monitor the currency markets, especially the Chinese Yuan. The USD/CNY exchange rate, which has been volatile this year and is around 7.4, will respond sharply to any speculation about the tariffs being changed. Options on currency ETFs like CYB offer a direct way to trade the rising tension leading up to the November arguments.

Impact on Agriculture

We must also consider the agricultural markets that were greatly affected when the tariffs were first implemented. Soybean futures, for instance, dropped over 20% within months during the 2018 trade conflict as Chinese buyers vanished. We can expect notable fluctuations in futures contracts for soybeans and pork as advocacy groups from these sectors make their concerns known in the coming weeks. The goal is to prepare for an increase in implied volatility over the next few weeks, not just the event itself. In past instances, we’ve seen implied volatility for heavily impacted stocks surge by over 30% in the month leading to major tariff deadlines. Entering these positions now, while the market is just starting to understand the timeline, is a smart approach. Create your live VT Markets account and start trading now.

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Ahead of the official US government data release, a survey from the American Petroleum Institute (API) offers insights into weekly oil inventories. Analysts expect a decrease in crude oil by 1 million barrels, an increase in distillates by 40,000 barrels, and a decline in gasoline by 200,000 barrels. The API collects data from oil storage facilities and companies, while the government report is prepared by the US Energy Information Administration (EIA). The EIA gathers information from the Department of Energy and other agencies. The API mainly focuses on total crude oil storage levels and changes each week, whereas the EIA also includes statistics like refinery inputs, outputs, and storage for different types of crude oil.

EIA Report’s Significance

The EIA report is typically seen as more detailed and accurate than the API survey. The official data is expected on Wednesday morning (US time), offering a broader market overview. Today’s private survey revealed an unexpected increase in crude oil inventory of 2.5 million barrels, which contrasts sharply with the anticipated draw of 1 million barrels. This difference between the API data and market expectations creates uncertainty. Tomorrow’s official EIA report will be crucial, as it is regarded as more thorough and precise. Currently, traders are using short-dated options in anticipation of the EIA release, leading to increased volatility in October contracts. A bearish EIA number confirming the inventory increase could push WTI crude prices below the important $85 per barrel support level seen over the past month. On the other hand, if the EIA reports a draw as expected, it could result in a short squeeze. The inventory situation is further complicated by the active hurricane season. Hurricane Leo, now a Category 3 storm, is heading toward the Gulf of Mexico, endangering production facilities that contribute to about 17% of U.S. crude oil output. Past hurricanes, like Ida in 2021, disrupted production by more than 2 million barrels per day, raising concerns of a similar event.

Demand Side Dynamics

On the demand side, signals remain strong, preventing significant price drops despite the bearish inventory news. The jobs report from last Friday indicated that the US economy added a surprising 210,000 jobs in August, suggesting robust consumer spending and fuel consumption. This strong demand serves as a price floor, even with temporary increases in inventory. It’s important to remember the significant divergence between API and EIA reports in spring 2024, which caused a sharp price reversal after the official data was released. While the API survey is useful, the EIA report provides a clearer market picture by including data on refinery inputs and other key indicators. Therefore, holding high-conviction positions before tomorrow’s official numbers carries considerable risk. Create your live VT Markets account and start trading now.

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