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    European indices see a slight rise at the open after yesterday’s declines, with Eurostoxx up

    by VT Markets
    /
    Sep 17, 2025

    Short-Term Volatility Increases

    The small increase in European markets doesn’t mean much as everyone awaits the Federal Reserve’s decision later today. This waiting period before a major announcement is causing short-term volatility to rise. For derivative traders, this means the cost of options, especially those expiring this week, is becoming high. The Fed’s comments on inflation are the main focus, especially after the latest Consumer Price Index (CPI) showed a stubborn rate of 3.1%. Additionally, the August jobs report exceeded expectations with 210,000 new jobs, raising concerns that the Fed might indicate that interest rates will stay higher for a longer time. This uncertainty has pushed the VIX, which measures market fear, above 18 this week, up from a low of 14 last month. With the risk of a sudden market drop, it’s crucial to review portfolio protections. Buying put options on major indices like the S&P 500 or the Eurostoxx 50 is a simple way to guard against a hawkish surprise from the Fed. It’s a classic defensive strategy in a volatile market.

    Expected Volatility Crush

    We anticipate a significant “volatility crush” right after the announcement, regardless of which direction the market takes. This means the implied volatility will decrease quickly, making any options bought today much cheaper. Traders looking to sell premium with strategies like iron condors are betting that the market’s actual move will be less extreme than the current high volatility suggests. Looking back to the 2022-2023 cycle shows how the markets reacted to the Fed’s fight against inflation. A surprisingly hawkish message can lead to sell-offs that last for weeks, and traders are prepared for that chance. The memory of sharp declines after similar meetings is keeping today’s buying activity cautious. Create your live VT Markets account and start trading now.

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