Trump Aims for a Deal
Trump aims for a deal with Russia and will discuss Ukraine with President Zelenskiy after their meeting. He believes a deal with Russia is likely and has economic tools, including sanctions, for use during the meeting.
Sanctions are described as powerful, suggesting that their threat may have influenced the meeting’s arrangement. Trump remains uncertain about an immediate ceasefire. After the meeting, if positive, Trump plans to call Ukraine’s President Zelenskiy and European leaders to discuss a potential second meeting.
If the meeting is poorly received, calls won’t be made. Trump clarified that negotiations are the responsibility of Ukraine and Russia.
Regarding China, tariffs prevent Chinese electric vehicles from entering the US market. Additionally, Trump expressed approval of Nvidia’s Blackwell chip.
The Market Sees Significant Risk
The upcoming meeting with Russia introduces significant binary risk into the market, making this a prime environment for volatility-based trades. With the VIX currently sitting near 19, we see a clear opportunity to buy straddles or strangles on key indices and ETFs, betting that the outcome—deal or no deal—will cause a sharp move in either direction. This strategy profits from the magnitude of the price swing, not the direction, which is fitting for an event with such uncertain results.
We should be particularly focused on the energy sector, where the stakes are highest. With WTI crude hovering around $88 a barrel and European natural gas futures still sensitive, a successful deal could send prices tumbling, making puts on energy ETFs like XLE attractive. Conversely, a failed meeting and the threat of more sanctions could trigger a supply-scare rally, making call options the better play.
The commentary implies that a peace deal is a real, if uncertain, possibility, which puts defense stocks at risk of a sharp downturn. We have seen the iShares U.S. Aerospace & Defense ETF (ITA) gain 12% year-to-date in 2025 on the back of continued geopolitical tensions. We can hedge this by buying puts on major defense contractors or the ETF itself as a direct play on a “peace-outbreak” scenario.
On the currency front, any hint of a deal that eases sanctions would likely strengthen the Euro against the dollar by reducing energy price pressure on the European economy. We see this as an asymmetric opportunity, as the market seems to be pricing in a low probability of a breakthrough. Therefore, short-dated EUR/USD call options could provide inexpensive upside exposure to a positive surprise from the meeting.
This situation reminds us of the weeks leading up to the conflict in early 2022, when implied volatility in energy and agricultural markets surged dramatically before any official action took place. We are seeing a similar pattern now, with options volume on wheat futures increasing over 20% in the last month alone. Getting ahead of the major volatility spike is key, as premiums will become much more expensive closer to the event.
Separately, the continued hardline stance on Chinese EV tariffs, paired with praise for US chipmakers, reinforces the ongoing tech decoupling theme. This suggests a pairs trade of being long the US semiconductor sector, perhaps through call options on the SOXX ETF, while remaining cautious on industrial sectors with heavy exposure to the Chinese market. The stability of the EV tariffs removes a variable for the US auto sector, but the focus on US tech leadership is where the momentum appears to be.
