Investors Hedge China, Tech Earnings as "TACO Trade" Mutes Trump-Driven Volatility

Investors are shifting hedges toward China-related geopolitical risks and upcoming tech earnings, as markets grow desensitized to volatility from former President Trump's rhetoric, according to Bloomberg analysis. The CBOE Volatility Index (VIX) spiked briefly last week before quickly retreating. Traders bought approximately 400,000 put options on the iShares China Large-Cap ETF (FXI) and 150,000 puts on the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) expiring in March. Simultaneously, hedging increased for major tech earnings, with puts bought on Nvidia (NVDA), Oracle (ORCL), and Broadcom (AVGO) expiring January 30. Analysts note the prevalence of the "TACO" (Trump Always Chickens Out) trade, which limits the duration and scale of market shocks from his statements. Market structure is also in focus. The rise of zero-days-to-expiration (0DTE) options and outflows from VIX-linked exchange-traded products may reduce market shock absorbers, potentially leading to sharper intraday swings if negative catalysts emerge.