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European volatility: Sector snapshot
Table 5: Volatility measures and indicative option prices for major European sector indices (data as of 16-Jun-17)
Bearish <<<< -------------------------------------------------- >>>> Bullish

3Mth ATMf implied volatility | Real vol* | 3Mth 95%-85% put spread** | 3Mth 100%-110% call spread** | 3Mth 90%-110% risk reversal** | Equity index

(Columns: Current, Weekly change, 2Yr %-ile | Current | Current price (% of spot), Weekly change (bps), 2Yr %-ile, Max payout ratio | Current price (% of spot), Weekly change (bps), 2Yr %-ile, Max payout ratio | Current price*** (% of spot), Weekly change (bps), 2Yr %-ile | Weekly return)

SX3P (Fd&Bv) | 10.7% -0.4% 2% | 10.1% | 0.6% -5 2% 16.4 | 2.1% -8 7% 4.8 | -0.2% 5 80% | 1.3%
SX6P (Utils) | 12.2% 0.0% 4% | 10.9% | 0.8% 2 4% 12.8 | 2.4% 1 5% 4.2 | -0.3% 0 95% | -0.1%
SX7E (Banks) | 22.7% 0.3% 2% | 18.6% | 1.9% 2 3% 5.4 | 3.6% 2 9% 2.8 | -0.5% 0 52% | -3.0%
SX7P (Banks) | 18.5% -1.2% 2% | 13.1% | 1.5% -10 3% 6.8 | 3.2% -15 5% 3.2 | -0.4% 10 86% | -1.9%
SXAP (Auto) | 16.7% -1.2% 1% | 11.7% | 1.3% -12 1% 7.8 | 3.0% -13 1% 3.3 | -0.4% 6 68% | -0.7%
SXDP (Health) | 13.0% -0.8% 1% | 8.7% | 0.9% -9 2% 11.5 | 2.5% -12 3% 4.0 | -0.3% 4 71% | 0.0%
SXEP (Oil&Gas) | 15.4% 0.0% 3% | 11.8% | 1.2% 0 3% 8.5 | 2.8% 2 2% 3.6 | -0.2% -2 97% | -1.3%
SXIP (Insur) | 14.0% -0.9% 1% | 9.4% | 1.0% -10 1% 10.0 | 2.7% -11 1% 3.7 | -0.4% 6 83% | 1.0%
SXKP (Telecom) | 15.4% 0.3% 3% | 11.1% | 1.1% 3 3% 8.8 | 2.8% 5 5% 3.6 | -0.3% -3 83% | -1.3%
SXNP (Indust) | 16.3% 0.1% 13% | 10.9% | 1.2% 1 23% 8.1 | 2.8% 1 10% 3.6 | 0.0% 0 100% | -0.3%
SXPP (Basic) | 23.8% -0.7% 3% | 17.8% | 2.0% -7 3% 5.1 | 3.5% 0 4% 2.9 | -0.3% -7 53% | -4.8%
SXQP (Prsnl&HH Gds) | 10.2% 0.0% 1% | 7.2% | 0.5% -1 2% 18.5 | 2.0% -1 1% 4.9 | -0.3% 1 76% | 0.3%
SXRP (Retail) | 13.2% 0.4% 10% | 12.8% | 0.9% 8 10% 11.3 | 2.5% 14 10% 4.0 | -0.1% -10 78% | -3.3%
SXTP (Trvl&Lsre) | 14.4% 0.0% 7% | 11.6% | 1.0% 1 7% 9.9 | 2.7% 0 8% 3.7 | -0.3% 1 41% | 0.5%

Source: BofA Merrill Lynch Global Research *Real vol = EWMA (Exponentially Weighted Moving Average) volatility, which measures historical price volatility but assigns greater importance to recent returns. Sigma(t)^2 = 0.94*Sigma(t-1)^2+(1-0.94)*r(t)^2, where r(t) is the return on day t. **Indicative mid prices; strikes as % of forward ***Negative values indicate that the bullish risk reversal takes in a credit.

Bank of America
Merrill Lynch

Global Equity Volatility Insights | 20 June 2017 15

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