The US president is expected to sign an executive order that allows 401(k) plans to include alternative investments. This change will offer more options beyond just traditional stocks and bonds. Insiders say the goal is to diversify retirement portfolios and offer greater flexibility for saving for retirement.

Big Changes Coming

We view this executive order as a clear sign of a major shift in how capital is directed. U.S. 401(k) plans hold over $7.5 trillion, so even a small shift toward alternative investments could lead to a huge influx of money. This isn’t just talk; it marks the beginning of a multi-year adjustment in the market. The main winners will be large alternative asset managers ready to handle this new influx. It may be wise to consider call options on major publicly traded private equity firms as a way to invest in this trend. Their growing assets mean more management fees, likely resulting in long-term revenue increases. Bringing in retail money into less liquid assets will likely lead to greater market volatility over time. We believe that buying long-term options on the VIX is a smart move, as the market is not fully reflecting the potential upheaval this policy could bring. Historically, major market structure changes—like the portfolio insurance trend of the 1980s—often led to unexpected volatility spikes. This shift began when the Department of Labor issued guidelines in 2020 allowing private equity in retirement plans, though many were slow to adopt. The upcoming executive order from the previous administration is intended to speed up this process, encouraging plan sponsors who have been cautious due to fiduciary concerns. This suggests the impact may be felt sooner than expected.

Effects on Key Sectors

We should also expect effects in sectors favored by private equity, such as technology and healthcare. Derivative traders can take positions in options on related sector ETFs, as new capital is likely to boost prices across the board. This presents opportunities beyond just investing in the asset managers. While private equity has usually outperformed public markets, a recent analysis by PitchBook showed that in the year ending Q3 2023, the S&P 500 outperformed private equity returns. This gap raises concerns that an influx of new money may lead to chasing deals at high valuations, risking future market instability. We need to be ready for both the initial surge and the possibility of difficulties years down the line. Create your live VT Markets account and start trading now.

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US stock indices, including the NASDAQ, finished higher, with the NASDAQ reaching a new record. The Dow Jones rose by 0.52%, the S&P 500 climbed 0.54%, and the Russell 2000 increased by 1.20%. European markets also gained, with Germany’s DAX up 1.52% and France’s CAC rising 1.29%. In the UK, the FTSE 100 went up 0.52%, Spain’s Ibex rose 0.78%, and Italy’s FTSE MIB increased by 0.92%. US retail sales in June jumped by 0.6%, exceeding the expected 0.1%. Initial jobless claims fell to 221,000, which was better than the forecast of 235,000. The Philadelphia Fed Business Outlook Index rose significantly to 15.9 from the predicted -1.0. Meanwhile, the Atlanta GDPNow forecast for Q2 was adjusted down to 2.4% from 2.6%.

Fed Members Cautious On Inflation

Members of the Federal Reserve expressed caution concerning inflation and tariffs. Core PCE is above the target at 2.8%. In the bond market, yields changed little: the 2-year yield is at 3.906%, the 5-year at 3.992%, the 10-year slightly dropped to 4.453%, and the 30-year yield decreased to 5.009%. In the currency market, the USD ended higher against major currencies, despite an initial decline during the session. Currencies like the EUR, JPY, and GBP experienced only slight changes against the USD. In this environment, there is a clear mismatch between the cautious Fed and the upbeat stock market. Positive reports, such as the 0.6% rise in retail sales and the drop in jobless claims to 221,000, leave the Federal Reserve little reason to cut interest rates. This data strengthens the case for maintaining a tight policy to fight inflation. Officials like Kugler and Bostic consistently signal a steady approach. Recent central bank predictions suggest only one rate cut this year, a big drop from the three cuts expected a few months ago. Daly’s comments reinforce this cautious outlook, indicating that while easing may eventually happen, it won’t be soon.

Potential Policy Shifts And Market Implications

This cautious stance contrasts sharply with stock markets, which keep reaching new highs. Historically, such gaps between policy and market performance don’t last long. With the CBOE Volatility Index (VIX) recently below 15, market complacency seems high. This indicates that buying protective put options on indices like the S&P 500 or investing in long volatility positions could be wise. Warsh’s sharp critique introduces a political wildcard for the Fed’s leadership and policy direction. His call for “regime change” and concerns about the board’s understanding of trends like AI could lead to unpredictable policy shifts. It’s important to monitor any changes in political rhetoric regarding the Fed’s future, as this could significantly affect market sentiment. Currently, the US dollar is benefiting from these dynamics, gaining against major currencies due to its relative economic strength and higher yields. While bond yields varied, strength at the short end suggests the market does not expect rate cuts soon. Strategies that invest in the dollar, especially against currencies from dovish central banks, appear well-supported by the current fundamentals. Create your live VT Markets account and start trading now.

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Major US stock indices ended on a positive note, with the NASDAQ hitting a new all-time high. This marks the NASDAQ’s 10th record close of the year, while the S&P 500 tallied its ninth. Closing figures show the Dow industrial average rising by 230.32 points, or 0.52%, to 44,485.10. The S&P index gained 33.76 points, or 0.54%, to reach 6,297.46, while the NASDAQ climbed 153.78 points, or 0.74%, to hit 20,884.27.

Netflix Earnings Report

Netflix reported earnings of $7.19 per share, surpassing the estimate of $7.06. The company’s revenue was $11.08 billion, just above the expected $11.04 billion. Netflix also increased its revenue forecast, now expecting between $44.80 and $45.2 billion, up from $44.43 billion. In after-hours trading, Netflix shares experienced fluctuations as the market reacted to the earnings report. With the market reaching new highs, we feel cautious optimism is warranted rather than outright bullishness. The tech-focused index remains strong, but these high levels bring the risk of a sudden drop. We believe this is a good environment for strategies that can benefit from upward movement while managing risk, like call debit spreads. The current CBOE Volatility Index, or VIX, is around 12.5, which is historically low. This suggests a sense of complacency among investors. In this low-volatility situation, protective options, such as long puts, are cheaper to buy. We see this as a chance to hedge long portfolios at a low cost before any market changes.

Post Announcement Dynamics

Netflix’s earnings report illustrates the dynamics following an announcement. Despite beating expectations and raising guidance, the share price fluctuations indicate that good news was already factored in. We advise traders to prepare for this “volatility crush” in future earnings by exploring premium-selling strategies like iron condors. Historically, periods of consistent record highs with low volatility, like we saw in parts of 2017, can last longer than anticipated but may end abruptly. Recent comments from Powell emphasized that the Federal Reserve is data-driven. Therefore, the upcoming Personal Consumption Expenditures (PCE) inflation data will be a key focus. Any surprising increase in that report could swiftly bring volatility back to the market. Create your live VT Markets account and start trading now.

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Federal Reserve Board Governor Christopher Waller is scheduled to give a speech about the economic outlook. He will speak to the Money Marketeers of New York University at 2230 GMT / 1830 US Eastern time. As a voting member of the Federal Open Market Committee, Waller has mentioned that he supports a rate cut in July. The Committee will meet on July 29-30. Also on the agenda is the Japanese Consumer Price Index (CPI) data for June. Tokyo’s June 2025 headline CPI increased by 3.1% compared to last year, falling short of the expected 3.3% rise. Analysts expect similar trends in the national data. Despite this, the Bank of Japan may consider raising its inflation forecast. Any updates on these forecasts could come during the Bank’s meeting on July 30-31.

Central Bank Policy Divergence

The next few weeks offer significant opportunities due to differences in central bank policies. Derivative traders should pay attention to the late July meetings of both the Federal Reserve and the Bank of Japan. Mr. Waller’s speech is expected to influence interest rate expectations. Given the uncertainty around his remarks, buying near-term volatility on U.S. interest rate futures might be a wise move. Historically, the VIX index, which measures fear in the equity market, typically rises in the week before FOMC announcements. We expect a similar increase in volatility this time, positioning for a sharp move in bond or equity markets after the decision on July 30th. In Japan, the situation is intriguing due to mixed signals. While inflation data may show a slowdown, the central bank is reportedly considering a more aggressive approach. This could lead to an unexpected reaction in the yen. We are preparing for a significant move in the USD/JPY currency pair following the July 31st policy meeting. In December 2022, the BoJ made a surprising policy change, which led to the yen strengthening nearly 4% against the dollar in one day. Buying options on this currency pair allows us to profit from such strong moves, regardless of the direction.

Heightened Global Market Volatility

The closeness of these two major central bank meetings at the end of July indicates a period of increased global market volatility. The potential for a rate cut by the Fed and a hike by the BoJ creates significant swings for all asset classes. Traders should be ready for sharp and correlated movements in equities, bonds, and currencies. This situation is reminiscent of the 2022-2023 period when aggressive U.S. rate hikes against a passive Japanese policy caused the yen to weaken significantly, falling from 115 to over 150 per dollar. This historical example shows how differences in central bank policies can create prolonged trends. We are getting ready for a new, powerful trend to emerge from these upcoming meetings. Create your live VT Markets account and start trading now.

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The effects of tariffs are still unclear. It might take months or even a few quarters to fully understand their economic impact. Because of this uncertainty, the Federal Reserve might want to hold off on making any policy changes. They need to see how tariffs influence inflation and economic growth. Businesses in the Southeast are reacting differently to the tariffs. Some are passing on the increased costs to consumers, while others are absorbing these costs by lowering their profit margins. It’s too early to tell if these tariffs will negatively affect consumer demand or cause inflation to rise again.

Cautious Stance On Rate Cuts

There is a careful approach toward rate cuts. Bostic and other Fed officials are skeptical that the current situation calls for any action at the upcoming meeting on July 29–30. The high inflation seen in the early 2020s reminds them to be cautious before deciding to cut rates. Bostic highlighted the need to protect the Federal Reserve’s independence, even amid outside pressure. He insisted that the Fed should focus on long-term economic stability, even if it means making unpopular choices. From Bostic’s comments, we think a key takeaway for traders is to expect more market volatility. His uncertainty about tariff impacts creates risks for the economy, which could lead to sudden market changes. We see this as a chance to set up trades that benefit from movement, not just a specific direction. This view is backed by mixed economic data. The June 2024 Consumer Price Index showed inflation slowing to 3.0%, while the University of Michigan’s consumer sentiment index recently dropped to a seven-month low. This mismatch between lower inflation and declining consumer confidence makes future market reactions hard to predict.

Upcoming July Meeting Strategy

With the upcoming July meeting in mind, we see a clear short-term opportunity. According to the CME FedWatch Tool, there’s less than a 10% chance of a rate cut. This makes options betting on such an outcome cheap to sell. This strategy lets us profit from the market’s belief that the central bank will keep rates unchanged. For the longer term, we’re looking for strategies that benefit from significant price swings in either direction as the impact of tariffs unfolds. The trade dispute of 2018-2019 caused the CBOE Volatility Index (VIX) to rise above 30 multiple times, starting from the low teens. We are considering buying long-dated strangles on bond ETFs because yields could either rise due to inflation or fall due to a slowdown in growth. His focus on caution and data stresses the need to be quick around important economic updates. The market’s sharp rise after the last CPI report shows how sensitive prices are to single data points right now. Therefore, we plan to use short-dated options to trade the volatility around the upcoming employment and inflation reports. Create your live VT Markets account and start trading now.

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The House of Representatives passed the Digital Asset Market CLARITY Act with a vote of 294–134, with support from 78 Democrats. This bill is the first major effort to regulate the cryptocurrency industry. It sets clear roles for regulators like the SEC and CFTC while creating a new category for registered digital assets. This aims to better connect crypto with traditional finance. Even with strong bipartisan support, the bill’s future in the Senate is unclear. Senators are currently drafting their version and are likely to make changes. Some Senate Democrats want the bill to address President Trump and his family’s cryptocurrency holdings. The CLARITY Act follows last year’s failed Senate effort with the FIT21 measure, which received wide Democratic support in the House. It is part of the House GOP’s larger “Crypto Week” package, which includes two other key digital asset bills aimed at updating regulations for blockchain and digital finance. We believe that the House’s approval of this bill will create significant volatility in the digital asset market in the coming weeks. The bill’s uncertain future can lead to price swings that derivative traders might find profitable. We have already seen a direct impact on the derivatives market, with the Bitcoin Volatility Index (DVOL) rising over 15% to above 60 around the time of the vote. Now, our attention is on the Senate, where the bill’s path is very uncertain and could change significantly. This legislative delay suggests traders prepare for large price swings in either direction soon. They might look at strategies that benefit from volatility, regardless of which way prices move. In the past, positive regulatory news has often triggered strong price increases, like the approval of spot Bitcoin ETFs in January, which led to a price jump of more than 50% in two months. If a similar bill passes in the Senate, we could see a similar reaction in the market, especially as institutional investors find a clearer path to enter. This indicates that holding long-dated call options might be a smart way to take advantage of the potential upside. The involvement of a former president’s cryptocurrency portfolio, valued at over $7 million according to blockchain data, adds a layer of political risk that could complicate the process. This uncertainty makes it sensible to hold protective puts as a safeguard against a possible market downturn if the bill stalls. It serves as a reminder that political news will significantly affect short-term price movements.

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The EU is keen to enter trade talks. The White House Press Secretary announced that President Trump shared a new tariff plan with the EU.

New Tariff Announcement

Beginning 1 August 2025, a 30% tariff will apply to all EU imports unless a trade deal is made beforehand. About 150 countries were informed of new tariffs of 10% or 15%. However, the EU and Mexico are facing a 30% tariff. This decision comes from the trade imbalance between the U.S. and the EU, along with the high tariffs the EU levies on cars and industrial products. These tariffs are described as a matter of national security.

Possible Market Reactions

There is a warning that more tariffs could arise if the EU decides to retaliate. We expect that the main market reaction to the tariff letter will be increased volatility. The uncertainty of a potential trade war is likely to cause large price fluctuations, especially as the August 1, 2025, deadline gets closer. Derivative traders should think about strategies to benefit from this market turbulence. Given Leavitt’s remarks on the EU’s willingness to negotiate, any news from Brussels will spark strong market reactions. European equities, especially in the German auto and French luxury goods sectors, face significant downside risks due to their reliance on American consumers. In 2023, the EU exported over €500 billion worth of goods to the U.S., showing substantial economic risk from this situation. In the currency market, the EUR/USD pair will be a key measure of these trade tensions. If negotiations break down, the Euro may weaken significantly, as the 30% tariff would hurt the Eurozone’s economic outlook. We expect higher demand for options that protect against a drop in the euro’s value compared to the dollar. Mr. Trump’s claim of national security will not shield U.S. companies dependent on European supply chains. Sectors like aerospace and pharmaceuticals might see increased costs and disruptions, affecting their profit margins. We recommend buying protection for U.S. industrial and healthcare stocks with significant European exposure. We foresee that broad market volatility measures, such as the VIX index, will rise and stay elevated. During the peak tariff escalations with China in mid-2019, the VIX soared over 60%, illustrating how markets respond to such uncertainties. Long positions on VIX futures or call options on volatility-tracking ETFs are direct ways to capitalize on this outlook. Create your live VT Markets account and start trading now.

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September crude oil futures rose by $1.04, ending at $66.23. Today’s highest price reached $66.27, while the lowest was $65.02. In August, the contract price increased by $1.16, or 1.75%, closing at $67.54.

Market Sentiment Shift

The recent rise in crude oil futures indicates a need to focus on essential supply and demand factors. Although the daily gains are small, they suggest a shift in market sentiment that we believe is supported by real data. This isn’t random; it’s a response to several important issues. Recent inventory reports are especially significant. The U.S. Energy Information Administration announced a crude inventory drop of 2.5 million barrels, exceeding analysts’ expectations. This tightening supply in the world’s biggest consumer is a strong bullish signal for the near future. Globally, OPEC+ has chosen to extend its voluntary production cuts of 2.2 million barrels per day through the third quarter, creating a solid price floor. Historically, when OPEC+ has shown similar discipline, like after the 2020 price crash, it has helped stabilize the market. This will likely reduce downside risks in the upcoming weeks.

Geopolitical Tensions and Potential Upside

We’re also seeing strong seasonal demand as the summer driving season begins in the Northern Hemisphere. U.S. gasoline demand recently neared 9.3 million barrels per day, marking a peak for this year and indicating increased consumption. This trend will likely draw down crude stockpiles and support prices. The ongoing geopolitical tensions in the Middle East are another major factor to watch. Any escalation involving key oil-producing countries or shipping routes could lead to rapid price spikes, similar to past incidents that added significant risks to oil prices. Traders need to be prepared for sudden changes driven by news. Given these conditions, we suggest that traders consider positioning for short-term price increases. The decrease in U.S. inventories, ongoing international production discipline, and rising seasonal demand create a strong case for higher prices. Bullish strategies, like buying call options, look promising in this situation. However, we should keep in mind that international producers plan to start unwinding their cuts in the fourth quarter. This indicates that the current price strength might only last a few months. A smart strategy would be to employ tactics that can benefit from rising prices while also managing risk effectively. Create your live VT Markets account and start trading now.

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Netflix will soon announce its earnings, with analysts predicting a 44.87% rise in earnings per share (EPS), going from $4.88 last year to $7.08. Revenue is also expected to grow by 15.7%, reaching around $11.06 billion, up from $9.56 billion last year. After the earnings report, the stock may move by about 6%. Key focus areas include advertising growth, subscriber engagement, and profit margins. Although price targets are high, ranging from $1.33k to $1.4k, even minor disappointments could affect the stock. The company’s price-to-earnings (P/E) ratios indicate strong earnings growth expectations, with a trailing P/E of 59.5× and a forward P/E of 46.8. Currently, Netflix shares are trading at $1269, which is a 42.4% increase this year. The stock saw significant gains in 2023 and 2024 but dropped by 51.05% in 2022. It hit a high of $1341.15 in June and a low of $821.10 in April. If it dips below its 50-day moving average of $1225.95, it could signal a decline. Other support levels to watch are $1176.28, $1141.24, $1100.26, and $1080.12. The 200-day moving average is $982.62, last near during an April correction. With the market bracing for a 6% movement after earnings, this is a critical time for derivative traders. The high expectations for profit and revenue growth suggest a possible major price swing, making options strategies that capitalize on volatility appealing. The company’s high valuation, with a trailing P/E near 60, offers little room for error. A slight miss in subscriber engagement or a cautious outlook on margins could lead to a sell-off. If results disappoint, the stock may revisit its 50-day moving average near $1226, in line with expected market movements. Conversely, a strong performance could push the stock towards its recent high of $1341.15. Reports from May 2024 indicated that its ad-supported plan has gained 40 million monthly active users, which supports the growth story. Positive commentary about this tier would greatly benefit call option holders. Given that the company added an impressive 9.33 million subscribers in Q1, expectations for this report are very high. Past strong performances have set the stage for elevated expectations. Any signs of slowing momentum could lead to significant backlash. For traders who expect a large move but are unsure of the direction, buying a straddle or strangle could be a good strategy, despite the high costs due to implied volatility. A more affordable option would be to use debit spreads, buying a call spread if bullish or a put spread if bearish. This approach limits both potential profit and risk. Looking beyond the immediate earnings report, we see strong underlying strength, indicating that buying on dips could be rewarding. Demand for the service remains steady, and its plan to broadcast two NFL games on Christmas Day 2024 is a notable new revenue opportunity. This long-term potential may provide a safety net for the stock, as investors are likely to step in during any significant downturn.

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Mary Daly highlights that the economy is growing steadily, and the job market is strong. However, we still face challenges as we have not yet achieved price stability. The main focus is on controlling inflation without getting sidetracked by other issues. Current economic policies and conditions are viewed positively.

Interest Rate Environment

Interest rates have been high for several years. The impact of tariffs was seen in the June Consumer Price Index (CPI), although other factors causing inflation are decreasing. There is a tendency to lower rates proactively. It is reasonable to expect two rate cuts this year. Given Daly’s outlook, it seems likely that interest rates will decrease, making it an important time to adjust our investment strategies. The market indicates this possibility, with CME’s FedWatch Tool showing over a 90% chance of a rate cut by September. We should respond by going long on interest rate futures, like those linked to the Secured Overnight Financing Rate (SOFR). These insights suggest that the equity market rally can continue, driven by proactive rate cuts. Historically, “insurance” rate cuts that begin when the economy is stable can lead to significant market gains, as seen in 1995. Therefore, we should consider buying call options on major indices like the S&P 500 to take advantage of this potential boost.

Inflation and Market Volatility

While her main focus is inflation, the move to cut rates ahead of time aims to ensure a soft landing and ease market fears. This means that after an initial spike around the announcement, overall market volatility is expected to lessen. We see an opportunity to sell VIX call options or short VIX futures in the medium term. The expectation of two rate cuts this year could also weaken the US dollar. A lower dollar is a typical reaction when a central bank cuts borrowing costs compared to other countries. We should consider buying call options on currency pairs like the EUR/USD or shorting the U.S. Dollar Index (DXY). Daly’s view that the economy is in a “good place” is backed by recent data showing a strong labor market with 206,000 jobs added in June and an unemployment rate near 4.1%. However, her concerns about price stability are confirmed by the June Consumer Price Index, which, although it dropped to a 3.0% annual rate, remains above the target. This combination of data supports the idea of a carefully managed easing cycle rather than a drastic emergency response. Create your live VT Markets account and start trading now.

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