The piece notes XLB's near-term option premium is at a five-year low, making bets on a directional move inexpensive. Materials are rallying, up about 17% YTD, driven by AI-related demand for copper and chemicals and policy dynamics. A modest 4-week move could unlock gains, since even small upside beyond breakevens yields outsized returns via long calls.
Trump's decision not to nominate Lighthizer hints at aggressive tariff policies. New tariffs on Chinese goods may rise from 10% to 30%. Nominee Greer is a China hawk, indicating a tougher stance on trade. Lighthizer's absence may lead to earlier tariffs than markets expect. Aggressive tariffs could negatively affect XLB and global supply chains.