New Zealand’s manufacturing PMI for July is 52.8, a bounce from June’s 48.8. The average PMI is 52.5, showing a positive turn toward growth after tough months. June’s PMI was adjusted to 49.2, signaling slow improvement. Challenges remain, including low demand, shrinking orders, high costs, inflation, tariffs, slow construction, and weak consumer spending.

RBNZ Expected to Cut Cash Rate

The Reserve Bank of New Zealand (RBNZ) is likely to lower the cash rate to 3% as inflation eases and unemployment hits a four-year high. Although the economy faces difficulties, the rise in PMI is a hopeful sign. The recent jump to 52.8 in the manufacturing PMI may offer a temporary boost to the New Zealand dollar, suggesting a potential recovery. This return to growth invites traders to reconsider the severity of the economic downturn. However, caution is needed due to ongoing issues like weak demand and increasing costs. This positive data point stands in contrast to the broader trend of an economy struggling for months. Such uncertainty can lead to increased market volatility, making trading options more appealing. Recent official data supports this view. The Q2 2025 CPI showed inflation cooling, now at 3.2%, down from the highs of 2023. Meanwhile, the latest labor report indicates unemployment has risen to 4.4%, its highest since 2021.

The Market’s Focus on RBNZ’s Next Steps

The market is closely watching the RBNZ’s next decision. A rate cut to 3.0% is highly probable at the September meeting, as the bank aims to tackle rising unemployment and slowing growth. Typically, a rate cut puts pressure on a currency, making any gains from the PMI report likely short-lived. Given these mixed signals, it’s wiser to focus on trading volatility rather than picking a specific direction. Strategies such as buying NZD/USD straddles could work well, as they benefit from significant price movements either way. This approach allows traders to take advantage of the uncertainty surrounding the RBNZ’s upcoming decision. For those with existing positions, hedging is crucial. If you are short on NZD, the strong PMI figure could indicate a possible short squeeze. Short-dated call options might be a cost-effective way to safeguard against a sudden rally before clearer guidance from the central bank. Create your live VT Markets account and start trading now.

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Soros Fund Management and Appaloosa Management increased their stakes in Nvidia during the second quarter. Soros Fund bought 932,539 shares, which raised its total by over 1,600% to 990,292 shares. Appaloosa Management added 1.45 million shares, a 483% increase, bringing its total to 1.75 million shares. Both funds also boosted their investments in UnitedHealth Group, a health insurer that has faced challenges. UnitedHealth saw an 8.2% rise in after-hours trading. Nvidia’s shares dipped 0.2% in after-hours trading on Thursday but are up 35.5% for the year. In contrast, UnitedHealth’s shares are down 46.3% year-to-date, even though they have recently gained back some ground. Looking at the Q2 2024 filings shows how major funds prepared for the AI boom by heavily investing in Nvidia. Their strong belief from last year continues to hold relevance today. The key is to update that long-term outlook based on current market conditions. As of today, August 14, 2025, Nvidia has gone up an additional 52% this year, even as volatility has increased recently. This morning’s U.S. Producer Price Index (PPI) data indicated a slight rise in inflation, causing uncertainty about the Federal Reserve’s next steps. For traders holding Nvidia, this may be a good time to sell covered calls to earn income from the higher premiums while keeping the core investment. Historically, tech leaders like Nvidia often see sharp, short-term pullbacks, even in a strong uptrend. An example is the 15% correction in spring 2024. Given the current economic uncertainty, buying protective puts with a one-month expiry could be an economical way to guard against a similar decline. This strategy lets us stay involved with the AI trend that Soros and Appaloosa recognized early on. The funds’ 2024 investment in the struggling UnitedHealth also offers a valuable lesson. The stock has bounced back over 30% from its lows as last year’s regulatory fears subsided, and medical cost trends stabilized, as confirmed in their Q2 2025 earnings call last month. This suggests that the recovery phase may be nearing its peak. With UnitedHealth now trading in a more stable range, it makes sense to use collar strategies. This involves buying a protective put and selling a covered call at the same time. This approach protects our downside while limiting potential gains. It allows us to secure the significant profits made since last year while keeping hedging costs low.

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Berkshire Hathaway, under Warren Buffett’s leadership, has made new investments in UnitedHealth, Nucor, Lennar, and DR Horton, while reducing its stakes in Apple and Bank of America. Following Berkshire’s US$1.6 billion purchase, UnitedHealth’s shares increased, even though the company has faced a tough year, with its stock price dropping about 50%, a DOJ investigation, and a CEO resignation. The investment in Nucor caused its shares to rise nearly 8%. Similarly, Berkshire’s increased stake in Lennar and its new investment in DR Horton both led to a 3% uptick in their stock prices. Berkshire also picked up smaller investments in Lamar Advertising and Allegion. Meanwhile, it has continued to cut back on its holdings in Apple and Bank of America. Berkshire’s overall portfolio is roughly valued at US$300 billion. The SEC had previously mentioned undisclosed holdings, which included DR Horton, Nucor, and Lennar. Warren Buffett plans to step down as CEO at the end of 2025, with Greg Abel set to take over. After these announcements, shares of UnitedHealth, Nucor, Lennar, and DR Horton rose, with UnitedHealth gaining extra interest as it trades at a P/E ratio just below 12. With this news, we are thinking about how to position ourselves for the upcoming weeks. The investment in UnitedHealth (UNH) is a strong indicator, showcasing a bold counter-market move. Since the stock has already dropped around 50% in 2025, we believe this suggests that the worst may be already reflected in its price. For derivatives traders, selling puts on UNH with strike prices well below the current market level could be a smart approach. This strategy takes advantage of the high implied volatility stemming from the news and aligns with the idea that the stock has hit a bottom. This perspective is supported by a recent report from the Centers for Medicare & Medicaid Services in late July 2025, which indicated that patient enrollment numbers are finally stabilizing after earlier disruptions. Berkshire’s new investments in homebuilders like Lennar (LEN) and DR Horton (DHI) signal a positive outlook on the housing market. We should think about buying call options with expirations in late 2025 to take advantage of potential gains. This timing seems favorable, as data from the National Association of Realtors for July 2025 showed a surprising 1.5% increase in new home sales, breaking a six-month downtrend. The new investment in steelmaker Nucor (NUE) suggests a bet on domestic infrastructure and industrial growth. This move seems to be in response to the latest Industrial Production Index numbers for July 2025, which exceeded expectations. Purchasing call spreads on NUE could be a lower-risk way to capitalize on anticipated strength in this sector. On the flip side, cutting back on Apple (AAPL) and Bank of America (BAC) might signal caution. With Apple trading close to its all-time highs from late 2024, this move hints at a belief that the stock’s valuation is becoming too high. We should contemplate selling call credit spreads to profit if the stock remains flat or dips slightly. The immediate outcome of these filings is a spike in implied volatility for all the mentioned stocks. Over the next few weeks, we expect this volatility to gradually decrease as the initial excitement calms. This presents an opportunity for premium sellers who can employ strategies like short strangles on these stocks, betting on a return to more typical trading ranges.

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The US Producer Price Index (PPI) for July showed a surprising increase of 0.9%, well above the expected 0.2%. On a yearly basis, the headline PPI rose by 3.3%, while the core PPI went up to 3.7%. These results stirred some uncertainty because they were influenced by warehousing and transportation—industries that usually don’t rely heavily on labor. The stock market reacted by reversing earlier declines, ending nearly unchanged with variations of just 0.03%.

Rising US Yields

US yields increased across the board as the odds of a September interest rate cut fell to 94%. Previously, there was a 6% chance for a 50 basis point cut, which has now shifted to a similar likelihood of maintaining current rates. The US dollar gained strength against several currencies, making the most significant strides against the AUD and NZD. It also saw notable increases against the EUR, JPY, GBP, CHF, and CAD. St. Louis Fed President mentioned that inflation is above target and noted signs of weakness in the labor market. They expect that the impacts of tariffs might lessen but could still last. Fed President Barkin pointed out improved business sentiment but also remarked on slower hiring. Crude oil futures climbed, gold prices fell, and Bitcoin experienced a sharp decline, while the US Treasury Secretary considered options for acquiring more Bitcoin. The unexpected rise in producer price inflation raises doubts about the likelihood of a September rate cut. This signals a need to consider hedging against high interest rates, possibly by looking at options on Treasury futures if the Federal Reserve delays easing.

Market Indecision

According to live data from the CME FedWatch tool, the chance of a September rate cut has decreased from a certainty to 94%. This situation echoes the market’s ups and downs in 2023, where traders frequently adjusted their expectations based on each Fed meeting. Derivative traders should be ready for increased volatility as we approach the next Fed decision, possibly using options on the VIX or major indices. The US dollar is significantly strengthening, especially against the Australian and New Zealand dollars, a typical reaction to rising US yields. We see continued dollar strength as a straightforward trade, suggesting call options on dollar-tracking ETFs like UUP. The weakness in commodity currencies hints at growing concerns about global growth. With the stock market recovering from losses to finish the day flat, investors are clearly divided. The tug-of-war between inflation worries and hopes for a soft landing presents opportunities for options strategies that profit if the S&P 500 remains in a specific price range. Meanwhile, holding protective puts on index ETFs like SPY is a wise move in case inflation data triggers a market drop. The upcoming meeting between Presidents Trump and Putin is a significant unknown, particularly for energy markets. Today’s rise in crude oil to over $63 a barrel reflects some of this geopolitical tension. We’re considering call options on oil ETFs to speculate on potential supply disruptions from the discussions. Bitcoin’s sudden drop was shocking, but news from the Treasury Secretary about possibly acquiring more Bitcoin shifts the landscape. This hints that any downturn could be temporary and viewed by the government as a chance to accumulate strategically. For us, buying long-dated call options on Bitcoin ETFs seems like an attractive way to position for a possible rebound. Create your live VT Markets account and start trading now.

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Federal Reserve Chair Powell will speak at 10:00 AM US Eastern Time on August 22. This speech is part of the Federal Reserve’s 2025 Jackson Hole Economic Policy Symposium, which runs from August 21 to 23. Many attendees and analysts are eager to hear insights from this important event.

Chair Powell’s Tough Choice

During the symposium, Chair Powell faces a tough decision about economic policy. No matter what he decides, market observers may feel disappointed. The Federal Reserve’s Jackson Hole meeting next week is highly anticipated, especially Chair Powell’s speech on Friday, August 22. Powell must choose between fighting persistent inflation or addressing a slowing economy. His decision will likely lead to a big market reaction, offering opportunities for traders who are prepared. Recent data highlights this pressure. The July Consumer Price Index was unexpectedly high at 3.4%, which pushes the Fed to stay aggressive. However, the last two jobs reports indicate a cooling labor market, suggesting a more cautious approach may be needed.

Options Strategies and Market Effects

This uncertainty before a major event means we should expect an increase in implied volatility in the coming days. The CBOE Volatility Index (VIX) is currently low at around 15, meaning options aren’t fully accounting for possible big market moves. This creates a chance to buy volatility before it becomes more expensive as we near the speech. A good way to bet on this uncertain outcome is to use options strategies that benefit from significant price changes, whether up or down. Traders can look at straddles or strangles on major indices like SPX or QQQ, which involve buying both a call and a put option. This approach is effective when you expect a large price swing but aren’t sure which direction it will take. We can learn from past events. Looking back at the August 2022 Jackson Hole speech, Chair Powell’s unexpectedly short and hawkish comments caused the S&P 500 to drop over 3% in one day. This shows that these speeches can quickly change market expectations. It’s wise to set up these positions early next week and be ready to act quickly after the speech. Once Powell speaks, the uncertainty in options will fade fast, causing implied volatility to drop sharply. Therefore, the strategy is to capture the price movement from the speech and then close the position. Create your live VT Markets account and start trading now.

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The Reserve Bank of New Zealand is likely to cut its official cash rate by 25 basis points to 3% in its policy meeting on August 20, as reported in a Reuters poll. This poll, conducted from August 11 to 14, showed that 28 out of 30 economists expect the rate cut, with only two predicting no change. In July, the central bank kept the rate at 3.25% but indicated a readiness to lower it if inflation stays stable. Annual inflation dropped to 2.7% in the June quarter, which is within the RBNZ’s target range of 1–3%. However, the unemployment rate rose to 5.2%, the highest level since late 2020.

Economists’ Predictions

Economists view the upcoming rate cut as part of the final stage of the RBNZ’s easing cycle. ASB and Westpac believe there will be no further cuts after August, while BNZ projects a drop to 2.75% by the end of 2025. ANZ and Kiwibank expect the rate to reach 2.50% next year. The median forecast suggests a further decrease to 2.75% in the first quarter of 2026, slightly sooner than earlier predictions from July. With the market nearly certain about a 25 basis point cut on August 20, this expectation is already reflected in current asset values. Therefore, our focus is on the Reserve Bank’s forward guidance. The real opportunity will lie in any surprising statements about future cuts. The key question is whether this will be the last cut or just a pause before additional easing in late 2025 or early 2026. Recent data showing sluggish GDP growth of 0.4% in the second quarter of 2025 and a drop in global dairy prices of over 5% since June supports the case for more cuts. The RBNZ’s commentary on these weakening conditions will be crucial for market movement next week.

Market Strategy

We recommend focusing on interest rate derivatives, especially options on 90-day bank bill futures. If the RBNZ indicates a greater likelihood of reaching a 2.75% cash rate by year-end, we anticipate futures prices will rise. A straddle—buying both a call and a put option—could be a smart strategy to capitalize on potential significant market moves, whether the bank’s tone turns out to be more dovish or hawkish than expected. This view also affects the New Zealand dollar. Recall that the currency dropped over 1.5% in one day in August 2019 after the RBNZ unexpectedly cut rates by 50 basis points. While a surprise of that magnitude is unlikely now, any indication of a quicker or larger cutting cycle than currently expected could push the NZD/USD exchange rate down towards its year-to-date lows. Given the uncertainty, we are looking at implied volatility in the currency options market. Current volatility is moderate, suggesting the market might be underestimating the potential for a sharp reaction to the RBNZ’s statement. Buying NZD/USD put options provides a defined-risk way to prepare for a dovish surprise from the central bank. Create your live VT Markets account and start trading now.

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US stocks barely moved today, with major indices ending close to where they started. The S&P 500 was up slightly by 0.02%, while the Nasdaq saw a small drop of 0.01%. The Dow Jones Industrial Average closed down by 11.01 points, or 0.02%, at 44,911.26. The S&P 500 rose by 1.96 points, or 0.03%, ending at 6,468.54. Meanwhile, the Nasdaq fell by 2.47 points, or 0.01%, finishing at 21,710.67.

Russell 2000 Performance

The Russell 2000 index, which represents small-cap stocks, dropped by 28.97 points, or 1.24%, closing at 2,299.08. Intel shares increased by $1.64, or 7.3%, reaching $23.86 after news about potential US government investment. Nvidia’s shares went up by 0.24%, while AMD’s fell by 1.88%, and Broadcom’s gained 0.69%. Netflix shares bounced back, rising by $26.12, or 2.17%, and Amazon’s shares improved by 2.86%, recovering from earlier losses. With major indices stuck at record highs, small-cap stocks are sharply dropping. This situation, where money is flowing into a few large companies while the broader market weakens, indicates caution among investors. The tight trading range of the S&P 500 suggests that the market may consolidate before making a bigger move.

Volatility And Market Trends

The CBOE Volatility Index (VIX) is near its yearly lows, currently around 13, making options cheaper. As we enter a historically volatile period for stocks in late August and September, buying protective puts on indices like the SPX could be a smart hedge. This low implied volatility offers a chance to prepare for a possible market downturn. Intel’s stock surge, driven by government discussions instead of business fundamentals, has significantly raised its implied volatility. The cost of options on Intel has increased, providing an opportunity to sell premium if we expect the stock to trade sideways post-excitement. This is a classic instance of political news creating short-term trading chances in a specific stock. Looking back at the market pullbacks in September 2023 and 2024, the current scenario feels similar. The lack of upward momentum, along with weakness in small-cap stocks, suggests we need to be defensive. We’ll be keeping an eye on a break below the S&P 500’s recent support levels as a signal to increase our bearish positions. Create your live VT Markets account and start trading now.

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Annual core wholesale inflation has jumped from 2.6% to 3.7%, with the Trump administration’s tariffs being blamed for this increase. Following the inflation report, Dow Jones futures fell by 200 points. Just before markets opened, Dow Jones futures dropped after the Producer Price Index (PPI) showed inflation growth in the wholesale sector. The core PPI, which excludes food and energy, rose to 3.7% year-on-year, exceeding both the expected 2.9% and June’s 2.6%.

Impact of Tariffs on Wholesale Prices

The tariffs implemented by the Trump administration are starting to affect wholesale prices now that the stockpiles built before the tariffs are running low. Last week, the national tariffs were fully enacted after earlier measures on steel and aluminum. After the PPI release, the Dow Jones Industrial Average futures fell from a slight increase around 44,950 to 44,750, down 0.35%. The headline PPI rose to 3.3% year-on-year, surpassing both the expected 2.5% and June’s 2.4%. Both the core and headline PPI saw a monthly increase of 0.9%. This data suggests that inflationary pressures are rising due to policies affecting market prices. The rise in core wholesale inflation to 3.7% is a serious warning. This suggests that producer costs are increasing faster than expected, which may hurt corporate profit margins soon. We need to monitor if companies can pass these costs onto consumers in the upcoming inflation report.

Market Volatility and Strategic Positions

This situation resembles what we faced in the summer of 2018 during trade disputes from the Trump administration. Historical data shows that the Producer Price Index for final demand rose over 3% year-over-year, leading to sharp market sell-offs and increased uncertainty. During that time, the CBOE Volatility Index (VIX) often surged above 20, indicating trader anxiety over price shocks caused by policies. Given this uncertainty, we anticipate that market volatility will likely rise. We should consider buying call options on the VIX or using long straddles on major index ETFs. These strategies would allow us to benefit from the larger price movements we expect as the market adjusts to this inflation news. The immediate 200-point drop in Dow futures shows a bearish initial market reaction. To take advantage of this, we plan to buy put options on indices like the S&P 500 and the Dow Jones Industrial Average. This offers a defined-risk way to profit if rising costs lead to a broader market decline in the coming weeks. This inflation report will likely push the Federal Reserve toward a more aggressive approach. Online tracking of the Fed funds futures market now indicates that the probability of an interest rate hike at the next meeting has jumped from 25% to over 50% just this morning. We should consider shorting interest rate futures to prepare for a central bank that may need to act sooner than expected. It’s important to remember that these pressures won’t affect all companies the same way. Sectors like industrials and consumer discretionary, which rely heavily on international supply chains, are the most at risk. Therefore, we are looking into establishing bearish positions on specific sector ETFs that are most exposed to these rising wholesale costs. Create your live VT Markets account and start trading now.

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The US Treasury Department plans to establish a Strategic Bitcoin Reserve following an executive order from President Trump in March. Treasury Secretary Scott Bessant stated that Bitcoin seized by the federal government will form the basis of this reserve. The Treasury is also exploring ways to acquire more Bitcoin without straining the budget.

US Aims for Bitcoin Leadership

This initiative reflects the administration’s goal to position the US as a key player in the global Bitcoin market. The US wants to be a dominant force in Bitcoin. This announcement marks a major change in how the US government, the largest player in the market, will deal with Bitcoin. We can expect increased demand, as the Treasury is not just holding assets but also looking to buy more. This will create a new type of buyer that is not price-sensitive, which should help stabilize prices in the coming weeks. Implied volatility for near-term options will likely stay very high. Traders should consider strategies that take advantage of rising prices and high volatility, such as buying long-term call options. Already, the T3 BitVol Index, a gauge of Bitcoin’s expected 30-day volatility, jumped over 25 points to 98 after this news. We anticipate the futures market will move into a steep contango, meaning futures contracts will trade at a much higher price than the spot price. The gap between the December 2025 CME futures contract and the spot price has widened to an annualized rate of over 19%. This offers a chance for basis trading, allowing traders to profit as institutional investors seek future exposure.

Big Changes in Global Digital Asset Strategy

This action takes away a significant potential supply from the market. In the past, we expected government-held Bitcoin to be sold off, like during the Silk Road seizures in the early 2020s. Now, this supply is being kept permanently, which will create a supply shortage just as demand receives official support. The focus on “budget-neutral” methods for acquiring Bitcoin is important; this isn’t just about printing money. The Treasury could use seized assets from other countries or issue bonds partially backed by the new reserve. This strategy mirrors what MicroStrategy did starting in 2020, but on a national level, it validates Bitcoin for other countries and pension funds. This “superpower” approach challenges other nations and may spark a global race for strategic digital assets. Recently, reports showed that sovereign wealth funds in the United Arab Emirates and Singapore increased their digital asset investments by an estimated $5 billion. The US policy now pressures other central banks and finance ministries to develop their own Bitcoin strategies. Create your live VT Markets account and start trading now.

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UK GDP Exceeds Expectations

UK GDP grew by 0.4% in June, beating the expected 0.1%, following a 0.1% decline in May. For the second quarter, growth was 0.3%, higher than the forecast of 0.1%. On an annual basis, growth was 1.2%, slightly down from 1.3% previously. In the Eurozone, GDP grew by 0.1% in Q2, matching forecasts, while annual growth remained steady at 1.4%. Employment increased by 0.1% in Q2 and 0.7% year-on-year, slightly exceeding expectations. However, Eurozone industrial production fell by 1.3% in June, worse than the expected 1.0% drop, reversing a 1.1% gain in May. Yearly output growth dropped to 0.2%, falling short of the 1.7% forecast and down from 3.1% in May. The EUR/GBP is testing the 0.8600 support level, trading around 0.8605. This pressure comes from the UK’s growth figures, which are better than a slower Eurozone economy. Weak industrial production data from the Euro area also suggests a bearish trend for the Euro.

Divergence in Monetary Policy

This situation prompts us to consider strategies to profit from a potential decline in the EUR/GBP rate. Options include buying put options to bet on a decrease or shorting futures contracts. Current data indicates that the path of least resistance is down for this currency pair. This outlook is reinforced by the current differences in monetary policy as of August 2025. The latest UK inflation for July 2025 is stuck at 2.9%, prompting the Bank of England to keep its base rate at 4.5%. Meanwhile, the European Central Bank, facing a lower inflation rate of 2.2%, has cut its main rate to 3.0% to stimulate its sluggish economy. In 2024, we witnessed similar trends when the EUR/GBP dropped below 0.8500 due to rate differentials. Upcoming inflation figures for the UK and Eurozone, set to be released next Wednesday, will be crucial. If the UK reports unexpectedly high inflation, it could break the 0.8600 support level for good. We anticipate increased volatility leading up to that announcement. Using options can help manage risk, letting us prepare for a downward movement while limiting potential losses if the data surprises. This is especially crucial since the 0.8600 level has held strong for two months. Create your live VT Markets account and start trading now.

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