At 5:30 PM German time, the Frankfurt Stock Exchange called it a day — leaving DAX bulls with a broad grin. The German benchmark index closed at 24,737 points, up 337 points or 1.4%. While US markets traded mixed and tech stocks came under pressure, European blue chips showed strength.
Europe Shines, US Stumbles
The Dow Jones closed nearly unchanged at 49,348 points. The S&P 500 and Nasdaq slipped slightly into the red, weighed down by profit-taking in mega-cap tech. Alphabet held steady at €385, while other FAANG names gave back gains. The rotation out of US tech into European value plays was palpable throughout the session.
DAX constituents benefited from positive economic signals out of Germany and relaxed interest rate expectations. Implied volatility (IV) on DAX options dropped from 18.2% to 16.8% — a sign traders are pricing in less downside risk.
The Options Side
Call buyers with strike 24,500 and end-of-May expiry celebrated: The contracts climbed from €0.42 to €0.92 — a gain of 120% in a single day. Anyone who bought €1,000 worth of calls yesterday morning was sitting on €2,200 by evening. Open interest on the 24,500 calls doubled to 18,400 contracts, a clear signal of bullish positioning.
On the flip side, Nasdaq puts with strike 18,200 expired nearly worthless. Theta sellers who sold iron condors on the S&P 500 yesterday collected full premium — a classic sideways day for premium sellers.
What Traders Are Watching Now
Focus now shifts to Thursday's ECB meeting. Markets are pricing in a 68% probability of another rate cut. If the ECB delivers, DAX calls with strike 25,000 could become interesting — currently trading at IV 19.4% and delta 0.32.
US earnings from NVIDIA and Tesla are coming up next week. Anyone betting on volatility should watch the weekly straddles: The €385 straddle on Alphabet currently costs €12.80 and implies a ±3.3% move.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results.