Insights 
VT 
Trump recently announced a major trade deal in Washington on Thursday morning. This news led to a rise in stock markets, with investors showing positive responses.
The S&P 500, tracked by Globex, experienced an increase following the announcement. However, caution is advised due to the thinner nature of overnight trading compared to regular hours.
Initial Market Reaction
We saw a sharp uptick in the S&P 500 futures following the announcement from Trump, as market participants seemed to price in stronger trade conditions going forward. The reaction was immediate and bullish, particularly in the early Globex session. Although the move was initially swift, much of it occurred when liquidity levels were lower. This tells us the reaction, while encouraging, may not yet be supported by broader participation or conviction.
Globex, because it operates outside standard market hours, typically sees fewer bids and offers, which makes price swings more pronounced. The initial jump, then, was likely exaggerated by that lack of depth. It’s not that the enthusiasm was unfounded, but rather, the full market had not weighed in.
Equity futures received the headline with confidence, suggesting broader expectations of continued support for corporate earnings. However, such movements tend to accelerate technical buying above key levels, especially when larger players aren’t active to provide balance. That means there is a risk of retracement if news momentum fades or if profit-taking sets in.
Powell’s comments earlier in the week about inflation and interest rate policy also continue to weigh on market sentiment in the background. The move in futures may well have blended optimism from the trade announcement with a market still digesting central bank messaging. From our end, we’ve noticed that rate traders have begun adjusting implied volatility levels, largely in short-term contracts, as they attempt to price in the next wave of directional risks heading into the monthly expiry.
There’s also a pattern here we’ve tracked a few times: headlines that hit during overnight sessions tend to spark front-loaded reactions. But the response during US cash hours frequently provides a more grounded take. If price action fails to extend gains when full volume returns, that often suggests the initial push was more headline-chasing than trend-setting.
Opportunities and Risks
We would highlight that implied correlation among major indices remains low, which indicates equities are moving more in response to sector-specific drivers or temporary events, rather than broad-based fundamentals. In that environment, large index futures can become disjointed from the underlying components. That opens opportunity, but it also adds complexity for positioning.
Upticks in volatility—particularly if they appear in skew or downside protection premiums—should not be ignored. Short-dated call options showed early activity after the trade headline, but activity was mostly in contracts about to expire, which tells us traders are still hesitant to build out positions too far forward.
What’s more, we’ve tracked gamma profiles around the 4,500 level on the S&P 500, and any meaningful breach in either direction is likely to result in forced flows from dealers adjusting their hedges. This makes directional moves more exaggerated once those levels are crossed.
Watching how open interest builds after today’s move should reveal how much appetite remains. If followthrough doesn’t take hold during regular trading hours, it would make sense to reassess option deltas to remain neutral or slightly contrarian, especially on days with key economic data.
There are also macro data releases due next week that should not be overlooked. If they don’t confirm the optimism implied today, any long gamma built up on the back of this trade news will be quickly unwound. We’ve noticed in previous cycles that when optimism is pinned on headlines, the skew in derivatives often becomes asymmetric—traders buy short-term upside, but fail to protect against reversal risk.
In summary, while the headline did spur a sharp and visible move in futures, the context in which it came—a thinner market, overlapping macro risks, and limited breadth—suggests that further confirmation is needed before adjusting positioning too aggressively. We continue to monitor order book depth and changes in implied volatility to gauge whether positioning is shifting with genuine conviction or being driven by short-term momentum chasing.
