Background: careful observation of signals
At the beginning of May 2025, I began to notice a series of small but significant diplomatic signals between the USA and China. Official representatives of both countries began to use more moderate rhetoric, and on May 5, an announcement was made about upcoming high-level negotiations in Geneva. For me, this was the first bell that a possible easing of trade tensions might occur. 🔎
Situation analysis
Having studied historical data on previous cycles of escalation and de-escalation of trade relations between the USA and China, I noticed that certain companies react particularly strongly to such news. Among them:
American tech giants with a strong dependence on the Chinese market and supply chains
Semiconductor manufacturers supplying components in both directions
Luxury brands for which Chinese consumers constitute a significant part of revenue
I paid special attention to Nvidia, a company that not only heavily relies on the Chinese market for its products but has also suffered from restrictions on the export of advanced chips to China in recent years. Their shares were trading at a discount specifically due to these geopolitical risks. 📊
News trigger
When the first leaks of information about 'significant progress' in negotiations appeared on May 10, 2025, I noticed that the market had not yet fully assessed the potential impact of this news on specific companies. Mainstream media spoke of a general easing of tensions but did not delve into details regarding the tech sector.
However, on May 11, the speech by U.S. Secretary of Commerce Lisa Garcia mentioning 'reviewing restrictions on semiconductor technologies' became a decisive signal for me. On the same day, I made a trading decision. ⚡
My trading strategy
Entry: I purchased call options on Nvidia shares expiring in 30 days at a strike price of $680 when the shares were trading around $650.
Position size: 5% of my trading portfolio, which aligned with my risk management rules.
Justification: If the USA really eased restrictions on chip exports, Nvidia could significantly increase sales in the Chinese market, which would lead to a revision of revenue and profit forecasts for the upcoming quarters.
Risk management: I set a stop-loss that limited potential losses to 40% of the option's value. 🛡️
Results and developments
Today, May 12, 2025, after the official announcement of progress in negotiations and the release of a joint statement, Nvidia's shares opened with a gap up of 4.3% and continued to rise throughout the day.
At the time of writing this post, my options are already up 85%, and I plan to hold the position until the complete realization of my trading idea, possibly until the official announcement of changes in export rules or until the next company report. 📈
Lessons learned
The importance of contextual understanding: It's not enough to just know about a geopolitical event — it's crucial to understand how it affects specific businesses and supply chains.
The advantage of deep analysis: Most traders react to headlines, but few dig deeper in search of nuances and details that could have the most significant impact on specific companies.
Risk management above all: Despite my strong conviction in my trading idea, I strictly adhered to risk management rules, which would allow me to stay in the game even in adverse developments.
Patience pays off: I monitored the situation for several weeks before making the trade, waiting for confirming signals.
What news do you consider when making trading decisions?
How do news events affect your trading strategies? Share your #TradeStories in the comments #NewsTrade
Disclaimer: This is not an investment recommendation. Trading financial instruments involves a high risk of capital loss. Every trader must make decisions based on their analysis and acceptable risk levels.
