Back Derivatives Strategy

Two Trades to Play For a Weaker US$ After the Rally Into Resistance

Published on July 20, 2025

Jeff Jacobson

The recent countertrend rally in the US$ (DXY index) reminds me a lot of the move we saw in the greenback from the middle of April into early May. Back in May, we saw the bounce stall right at the 50-day moving average (which has been firmly in pace as resistance since mid-February), and then the dollar declined to new lows over the next six weeks. Once again, the rally we have seen by the dollar in July appears to have stalled (for now) at the declining 50-day moving average. Should this resistance hold, I would expect the assets that performed well as the dollar slid form mid-May to late June to do well once again. Looking back at that period, there were two trades that worked very well that I would like to highlight again that I believe could also do well here should the dollar reverse lower.

US$ index (DXY) with a very similar move in July to the April-May rally we saw into the 50-day resistance

Silver (SLV) and Emerging Markets (EEM) both did very well as the DXY weakened from mid-May thru June

Buy emerging markets as the US$ weakens

The ishares MSCi Emerging Markets etf (EEM) is the most actively traded EM etf. Back in the May thru June period I reference above, it gained 6.35% as the dollar made new lows (slightly outperforming the S&P). Here are some other reasons why I like the setup to own upside calls in EEM as an “anti-dollar” trade at this time:

1. Chinese tech stocks (KWEB) are starting to breakout again. You get a decent amount of exposure in those names ( BABA, Tencent, JD, etc) in EEM at a lower vol than buying KWEB calls

2. Could see a rotation out of Mag7 here after a massive push higher when they report earnings over the next month (prob supports owning “other” areas of the market that have tech exposure

3. EEM call vol is low. The September 40-delta call vol is ~ 14

4. Taiwan Semi (TSM) is the largest weight in EEM @ 10.8%. They reported very strong earnings on Thursday and shares hit a new all-time high, before pulling back a bit on Friday

5. The EEM/SPY relative spread looks poised to breakout of the recent consolidation

Trade:
Buy EEM Sept 50 calls for $0.90 (EEM 49.08 Fri close ref)

Trade Details:

Buying the Sept (2-month) 43-delta calls to play for a possible repeat of a strong rally should US$ weaken after a rally back to resistance
Emerging markets tend to catch a bid as dollar weakens and money rotates out of the US
EEM call vol is just above the 6-month lows
Defined-risk way to play for emerging markets to “catch-up” to the US rally over the next few months
Please contact me or the 22V sales team for updated pricing and execution capabilities

China tech stocks (KWEB) broke out this week. EEM has decent exposure to those names at a lower implied vol on the calls

EEM 2-month 40-delta call implied vol is just above the 6-month lows

Could see a breakout in the EEM/SPY relative spread after several months of consolidation

Silver looks ready to shine

Silver also did very well between mid-May and the end of June as it rallied by ~ 10.5% when the dollar weakened. Perhaps what is even more impressive now is that even as the dollar has caught a bid in July, silver is still UP ~ 6% over that time. Silver’s ability to rally in the face of a stronger dollar likely speaks to the underlying bid. We saw the significant technical breakout for SLV back in June as it was able to move above clear resistance. After consolidating for a bit, it has continued to make new highs while also outperforming gold. I think a decided pullback in the dollar from here could push SLV sharply higher once again over the next few months. While SLV upside call vol is not quite at the lows, it still trades near the lower end of its one year range. In addition, upside call skew is back trading at the highs (upside calls are “expensive” to the closer to the money calls). Given the potential for another sharp move higher, I like the risk/reward of buying (adding) upside SLV exposure at this potentially key level for the dollar.

Trade:

Buy SLV Sept 36 calls (39 delta, 27.6 vol)
Sell SLV Sept 42 calls (9 delta, 33.2 vol)

Costs ~ .86 (SLV 34.61 Fri close ref)

Trade Details:

Buying the Sept 30-delta upside call spread to play for new highs in silver over the next two months
SLV rallied by 10.5% when $ index declined between the middle of May and end of June after stopping at resistance
Call skew back at the highs. Selling the 42 calls covers 19% of the cost of buying the 36 calls
Trade offers a 6x to 1 max payout at September expiration
Call spread can be added to an existing long silver position, or as a new standalone trade
Please contact me or the 22V sales team for updated pricing and execution capabilities

SLV with a clear breakout back in June (as the US$ was making new lows)

Silver/Gold spread also broke out above the 1-year downtrend on the latest move higher in silver

SLV call skew also back to the highs (bottom chart). Another reason I like the September call spread trade here

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