European Equity Derivatives Strategy H2 2026 Outlook and Trade Ideas: the Pain-Trade Remains to the Upside

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European Equity Derivatives Strategy H2 2026 Outlook and Trade Ideas: the Pain-Trade Remains to the Upside

J P M O R G A N Global Markets Strategy

10 June 2026

European Equity Derivatives

Strategy

H2 2026 Outlook and Trade Ideas: the Pain-Trade

Remains to the Upside

The Iran war lifted European volatility from a mid-teen regime to persistently Global Quantitative and Derivatives

higher levels. We expect volatility in H2 to be lower than the H1 median of 21, with Strategy

a target VSTOXX level of 18 to 19. European equities are expected to catch up, but Davide Silvestrini AC

this view is conditional on progress on the Iran war. Meanwhile, positioning in (44-20) 7134-4082

European equities has weakened, and option-selling flows, which help suppress davide.silvestrini@jpmorgan.com

volatility, remain subdued. J.P. Morgan Securities plc

Esmail Afsah AC

(44-20) 7742-9231

The pain-trade remains to the upside: Betting markets still imply low near-term esmail.afsah@jpmorgan.com

odds for the reopening of the Strait of Hormuz. Any positive surprise on this front J.P. Morgan Securities plc

would compress Europe’s energy risk premium and would likely lead to a fast Yangyang Hou

catch-up rally, especially as European equities are under-owned. We recommend (44-20) 3493-1012

covering a quick resolution scenario with SX5E and SX7E Jul-26 call spreads. yangyang.hou@jpmorgan.com

We also like costless SX7E Sep-26 1x2 call ratios to express upside in banks, with J.P. Morgan Securities plc

a conservative breakeven. Tony SK Lee

(852) 2800-8857

Upside in rate sensitive equities: we expect yields to drift lower into year-end on tony.sk.lee@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited/ J.P.

a softer inflation impulse and an eventual de-escalation.