Spanish Growth Continues To Outperform
We are seeing continued resilience from the Spanish economy with the Q4 2025 gross domestic product figure of 2.7%. This data confirms a trend of outperformance, especially when compared to the broader Eurozone, which we saw only grew by a revised 0.5% in the same quarter. This divergence between Spain and core European economies like Germany presents a clear opportunity. Given this strength, we should consider adding to bullish positions on Spanish equities through derivatives. Call options on the IBEX 35 index, or on major Spanish banks and tourism stocks, look attractive for the coming weeks. The services sector in Spain, which recent data showed expanded by over 3.5% in that same quarter, continues to be the main engine for this outperformance. This strong Spanish data complicates the European Central Bank’s plans for potential rate cuts later this year. With Spanish inflation still hovering at a stubborn 3.1% in February 2026, the ECB will be cautious. This suggests we should use interest rate futures to position for fewer rate cuts than the market is currently pricing in for the second half of 2026. A relative value trade seems most appropriate in this environment. We can structure a pairs trade by going long IBEX 35 index futures while simultaneously shorting German DAX futures. This strategy isolates Spain’s specific economic strength and would have been profitable through much of 2025, a year where Spanish stocks returned over 15% against a nearly flat performance from their German counterparts. The data was not a major shock but rather a confirmation, which could lead to lower implied volatility. Selling slightly out-of-the-money put options on strong Spanish companies allows us to collect premium. This is a bet that the market has already priced in this stability and that we will not see a sharp downturn in the coming weeks.Positioning For Lower Volatility
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