European stocks have started the day positively, with major indices showing gains. The Eurostoxx, Germany’s DAX, and France’s CAC 40 all increased by 0.4%. The UK’s FTSE rose by 0.2%, Spain’s IBEX jumped by 0.8%, and Italy’s FTSE MIB moved up by 0.1%. In the US, S&P 500 futures suggest a 0.3% rise, driven mainly by gains in technology stocks. The market remains steady, with expectations that the Federal Reserve may ease policies soon, influenced by recent US labor market data. Investors are looking ahead to the upcoming US CPI report, which is expected to provide insights before the Fed meeting. Although geopolitical tensions persist, they have not significantly affected market sentiment.

Strategies for a Bullish Market

With the market feeling positive, there’s a good opportunity for cautious bullish strategies ahead of the Fed. Many believe that a rate cut is on the way, backed by recent US job openings data showing a drop to 8.5 million in August 2025, indicating a cooling labor market. This stable environment is ideal for strategies that could capitalize on further gains. The immediate event to watch is tomorrow’s US CPI report, which could lead to market volatility. The VIX index is at a low of 13.5, signaling a sense of complacency and making volatility options more affordable. It might be wise to consider buying VIX calls or options on volatility ETFs as a hedge against unexpectedly high inflation numbers. For those wanting to ride the upward trend, selling put spreads on the S&P 500 or the tech-centered Nasdaq 100 can be a way to earn premium while managing risk. This approach is profitable if the market moves up, stays flat, or even dips slightly. A more straightforward bullish strategy could be buying call spreads, which help limit costs while still offering upside potential if CPI data is favorable for the market.

Geopolitical Tensions and Sensitivity in European Markets

Geopolitical tensions have largely been overlooked lately, similar to what we observed in late 2021 and early 2022 before the markets moved sharply. With low implied volatility for downside protection, buying some inexpensive out-of-the-money puts on major indices like the Eurostoxx 50 can act as a smart “lottery ticket” hedge. This provides coverage against a sudden change in sentiment that the market isn’t currently anticipating. The European rally is impressive but remains susceptible to signals from the US Federal Reserve. With Eurozone inflation steady at 2.1% in August, the European Central Bank may have less flexibility to ease policies compared to the Fed. This potential difference might make a pairs trade, such as going long S&P 500 futures and short DAX futures, an appealing position in the coming weeks. Technology stocks continue to drive growth, with the Nasdaq 100 outperforming the S&P 500 by over 8% year-to-date in 2025. We can enhance this momentum by utilizing options on specific large-cap tech stocks or the QQQ ETF. Strategies like ratio call spreads could be effective in profiting from significant upward movements if supportive economic data continues. Create your live VT Markets account and start trading now.

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