European stock markets had mixed results at the end of the trading day. The German DAX decreased by 0.07%, while France’s CAC increased by 0.67%. The UK’s FTSE 100 dipped by 0.42%, but Spain’s Ibex rose by 0.47%. Italy’s FTSE MIB saw a notable gain of 1.1%. Over the past week, major European markets saw overall growth. The German DAX went up by 0.81%, and France’s CAC jumped by 2.33%. The UK’s FTSE 100 climbed by 0.47%, reaching a record high. Spain’s Ibex recorded a 3.05% increase, reaching its highest level since December 2007. Italy’s FTSE MIB improved by 2.47%, marking the best performance since June 2007.

Investor Confidence Grows

The substantial weekly gains, particularly for Spain and Italy, indicate strong investor confidence, as these indices are reaching levels not seen since before the 2008 financial crisis. This surge seems to be supported by the latest Eurozone flash Consumer Price Index (CPI) for July 2025, which registered at a manageable 2.1%. This data has reinforced the European Central Bank’s more cautious stance, increasing the appetite for risk. However, the mixed results on Friday, with slight declines in the DAX and FTSE 100, suggest that some investors might be taking profits at these record highs. This could mean we are entering a phase of consolidation or a small pullback in the coming days, which is a normal response after such a rapid rise. European volatility, as shown by the VSTOXX index, has dropped to 14.5, well below its five-year average of around 19. This low level of implied volatility makes options contracts more affordable, offering a chance to establish positions for potential future movements with a favorable risk-reward balance.

Options Strategies to Consider

Given the strong market trend, selling out-of-the-money put spreads on indices like the CAC 40 or DAX for September 2025 expiration may be a wise choice. This strategy allows us to earn premiums while expecting that the market won’t experience a significant decline in the next few weeks. It profits from a rising or stable market and the passage of time. For those with significant long equity positions, buying protective puts on an index like the FTSE 100 is now more affordable due to the low volatility. Reflecting on the market correction in autumn 2023, we see how quickly investor sentiment can change from record highs. Having a small allocation to puts can provide essential protection against sudden downturns. Create your live VT Markets account and start trading now.

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