Insights 
VT 
US-China trade talks are advancing, with possible agreements emerging on key issues like tariffs and soybean purchases. Progress has been reported in Malaysia, with a preliminary deal reportedly reached on matters such as fentanyl and tariffs on ship deliveries.
There is anticipation for a meeting between the US and Chinese presidents, where more details about the agreements may unfold. The US Treasury Secretary has commented on the possibility of China delaying action on rare earths for a year, which is seen positively.
China’s Soybean Purchases
Additionally, the US Treasury Secretary mentioned China would purchase a large quantity of US soybeans, which may impact Brazil, as China had been buying more from them in recent months. Details of the trade negotiations are expected to be further clarified during the presidential meeting.
With US-China trade talks showing the first real signs of progress since tensions flared up again in early 2025, we are seeing a clear risk-on shift in the market. The S&P 500 has already climbed over 2% in the last week, so traders should consider buying call options on broad market indices like the SPX to capitalize on further positive announcements. However, given the history of these talks, it is wise to use defined-risk strategies like call spreads to limit potential losses if the deal falters.
The CBOE Volatility Index (VIX) has fallen sharply to under 14, reflecting this newfound market optimism and making protective options cheaper. We believe this presents a valuable opportunity to hedge against a negative surprise from the upcoming presidential meeting. Purchasing out-of-the-money November VIX call options offers an inexpensive way to protect portfolios from a sudden reversal in sentiment.
In the currency markets, we are seeing the Australian Dollar, a common proxy for Chinese economic health, strengthen against the US Dollar, breaking above the key 0.6800 resistance level. This trend is likely to continue if a deal is confirmed, suggesting long positions in AUD/USD through futures or options. A weakening US Dollar could also make shorting the USD/CNH pair an attractive play as the Yuan appreciates on positive news.
Trading Opportunities
The specific mention of China purchasing a “significant” amount of US soybeans is a direct trading signal, with some reports suggesting initial orders could reach up to 10 million metric tons. This reverses the trend seen over the past few years where Brazil captured most of China’s demand. We see opportunities in buying call options on soybean futures or the Teucrium Soybean Fund (SOYB) ahead of the official confirmation.
Finally, we should look at sector-specific plays based on the details emerging from the talks. The potential one-year postponement of action on rare earths could create headwinds for producers, making put options on the VanEck Rare Earth ETF (REMX) a tactical play. Conversely, positive news on tariffs for ship deliveries, which has already helped push the Baltic Dry Index up 5% this month, could boost global shipping stocks, making call options on major carriers attractive.
