Assumption Day is being observed as a public holiday in several European countries, including France, Spain, Italy, and parts of Germany. It coincides with Ferragosto in Italy, contributing to a quieter market atmosphere as many people are in a holiday mood.
The Milan exchange is the only one closed for the holiday. Other exchanges remain open, but trading activity is expected to be subdued due to the holiday celebrations.
Thin Trading Volumes
With today being a holiday in much of Europe, we are seeing thin trading volumes across the major exchanges. Looking back at patterns from August 2023 and 2024, we know that average daily volumes can drop by as much as 20% during this period. For derivatives traders, this translates directly to wider bid-ask spreads and the increased risk of price gaps on low volume.
Given the holiday mood extending into next week, we are advising caution on opening large new positions. The risk of sharp, unpredictable price swings makes it prudent to widen stop-losses on existing trades to avoid being whipsawed by minor news. This environment is simply not built for aggressive, short-term directional bets on futures or options.
We see this late-August lull as an opportunity to prepare for the return of volatility in September. Historically, volatility, measured by the VSTOXX index, has often bottomed out in these quiet summer weeks before climbing as institutional traders return to their desks. For instance, the VSTOXX saw its yearly lows during the summers of the early 2020s before eventful autumn seasons.
Market Strategy for September
This leads us to consider buying longer-dated options while implied volatility remains suppressed. Purchasing October contracts on major indices like the DAX or CAC 40 allows us to position for a significant market move after this quiet period ends. The lower premiums currently available reflect the market’s calm, offering what we see as a favorable entry point for a potential spike in September.
