European stock markets are set to open strongly, fueled by hopes of a US-EU trade agreement. Recent positive news and a good outlook are boosting investor confidence. Technology stocks are gaining strength, partly due to Alphabet’s excellent earnings report. This upbeat trend helps balance out Tesla’s weaker results, contributing to the overall positive market mood.

US Market Futures Update

In the US, S&P 500 futures are up by 0.1% and Nasdaq futures have increased by 0.3%. These gains reflect a lively market atmosphere and ongoing interest in tech growth. We see the current optimism as a chance to invest for further market gains. Buying near-term call options on major indices like the S&P 500 seems wise. This strategy aims to benefit from the positive feelings around potential trade agreements and strong company earnings. The CBOE Volatility Index, or VIX, is currently around 14, below its historical average of 20. This low implied volatility means options are relatively cheap, offering a great entry point for new long positions. We believe this is the perfect time to buy calls before any rise in uncertainty.

Technology Sector Positioning

Given the strong performance, we are focusing on the technology sector. Consider call options on the Invesco QQQ Trust, which tracks the Nasdaq 100 and has gained over 35% this year. This strategy capitalizes on momentum despite some corporate challenges. However, recent comments from the former president remind us how quickly political statements can change market sentiment. The sharp downturns during the 2018-2019 US-China trade conflict show how a single announcement can create volatility. Thus, buying some low-cost, out-of-the-money puts on weaker industrial sectors provides a cheap way to protect against sudden negative news. For European markets, we are looking at options based on the Euro Stoxx 50 index to benefit from a potential rally. Recent data from the Eurozone shows inflation has dropped to 5.5%, although manufacturing PMI indicates a decline below 45. This calls for a cautious strategy, perhaps using bull call spreads to limit risk while still seizing opportunities for gains. Create your live VT Markets account and start trading now.

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