Trade Deal Deadline Approaching
The US monitors an upcoming trade deal deadline with Canada, Mexico, and Switzerland. China’s data for July indicates consumer price inflation remaining flat year-over-year, yet surpassing expectations month-over-month. We are seeing a direct hit on chipmakers like Nvidia and AMD with the new requirement to pay 15% of their China sales revenue to the US government. This will directly reduce their profits in an important international market. This could pressure their stock prices, making bearish option strategies like buying puts on these individual names an interesting play. To put this in perspective, we can look back to 2023 when China represented about 20% of Nvidia’s total revenue. Historical precedent from the 2018-2019 trade disputes showed that similar tax announcements caused implied volatility on semiconductor stocks to spike over 30% in short periods. We should expect a similar jump in volatility, making selling options on NVDA or AMD risky until the market digests this news. At the same time, Fed Governor Bowman’s call for a September rate cut introduces a positive force for the overall market. The latest inflation data for July 2025 showed the headline Consumer Price Index (CPI) at 2.9% year-over-year, which is feeding this dovish sentiment. The CME FedWatch Tool now indicates a nearly 70% probability of a 25-basis-point cut next month, which could support broad index call options.Market Impacts of Japan Holiday
With Japan’s market closed today, we are seeing reduced liquidity, particularly in the US bond market. This thin trading environment, coupled with the conflicting signals from the tech sector and the Fed, could keep the S&P 500 in a defined range this week. This suggests that setting up range-bound index option strategies, like an iron condor on the SPY, could be a wise move until a clearer trend forms.
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