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6
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Summary
This document is a page from a Bank of America Merrill Lynch 'Global Equity Volatility Insights' report dated June 6, 2017. It contains Table 6, a summary of open financial trades (swaps, calls, puts) as of June 5, 2017, detailing trade descriptions, open dates, levels, terms, and strategic rationales. The document bears the Bates stamp HOUSE_OVERSIGHT_023597, indicating it was produced as part of a Congressional investigation.
Organizations (13)
| Name | Type | Context |
|---|---|---|
| Bank of America Merrill Lynch | ||
| House Oversight Committee | ||
| BoFAML | ||
| Barclays | ||
| Aviva | ||
| Prudential | ||
| BT | ||
| Glencore | ||
| Tesco | ||
| CRH | ||
| BA | ||
| Standard Chartered | ||
| HSBC |
Key Quotes (4)
"Investors should re-assess attractiveness of popular and (typically) technically motivated longer-dated RV vol trades"Source
HOUSE_OVERSIGHT_023597.jpg
Quote #1
"Risks of a hard Brexit rising and (weak) currency tailwind likely to prove short-lived"Source
HOUSE_OVERSIGHT_023597.jpg
Quote #2
"USDJPY and NKY the biggest beneficiaries of a Trump win"Source
HOUSE_OVERSIGHT_023597.jpg
Quote #3
"Equity-FX correlation is not priced for a spillover of populism into the EU"Source
HOUSE_OVERSIGHT_023597.jpg
Quote #4
Full Extracted Text
Complete text extracted from the document (8,146 characters)
Summary of Open Trades (5-Jun-17)
Price data for open level reflects the price on open date and does not necessarily reflect the price at which the trade could be executed at the date of this report. Our trades are structured to be executed on the open date and are not necessarily appropriate to execute as formulated beyond that date.
Price data for open level reflects the price on open date and does not necessarily reflect the price at which the trade could be executed at the date of this report. Our trades are structured to be executed on the open date and are not necessarily appropriate to execute as formulated beyond that date.
Table 6: Summary of open trades as of 5-Jun-17
Trade Description | Open Date | Open Level | Expected Trade Term | Rationale
Long SX5E vs short SPX Dec18 var swap | 5-Jul-16 | 6.1 vols | Dec-18 expiry | Investors should re-assess attractiveness of popular and (typically) technically motivated longer-dated RV vol trades, given environment of structurally higher political & economic risks and increasingly limited policy options
Long NKY vs short SPX Dec18 var swap | 5-Jul-16 | 5.7 vols | Dec-18 expiry
Long SX5E vs short SPX Dec18 put vs put | 5-Jul-16 | 0.00% |
Buy a 1Y ATM worst-of call on SPX & TLT | 18-Jul-16 | 0.9% | 1 year | Cheap equity upside in a bond / equity melt-up
Buy SPX>UKX Jun17 ATM outperformance call, conditioned on SPX lower at maturity (qUSD) | 17-Oct-16 | 2.0% | Jun-17 expiry | Risks of a hard Brexit rising and (weak) currency tailwind likely to prove short-lived; position cheaply for FTSE 100 (UKX) underperformance
Buy UKX Jun17 6650 put, sell SPX Jun17 1850 put | 17-Oct-16 | 2.6% | Jun-17 expiry
Buy an EWZ Jun-17 40 call conditional on SPX<2200 at expiry | 24-Oct-16 | 1.7% | Jun-17 expiry | Using derivatives to capture Brazil (EWZ) upside potential following start of easing cycle
Buy an SX5E Sep-17 95% put conditional on EUR 10Y CMS > 1.1% or < 0.3% in Mar-17 | 14-Nov-16 | 2.7% | Sep-17 expiry | Remain long equities and cheapen hedges by conditioning on rates
Buy 2823 HK Jun-17 90/110 strangle | 21-Nov-16 | 5.55% | Jun-17 expiry | China risk premium rising but A-shares vol still at all-time lows
Buy ESTX50 Dec17 90% put contingent on EURGBP < 0.82 by Jun17 expiry | 2-Dec-16 | 1.63% | Dec-17 expiry | Equity-FX correlation is not priced for a spillover of populism into the EU, which could cause EUR to fall against an already weakened GBP as equities fall
Buy SPX>UKX Jun17 5% outperformance call (qUSD) | 2-Dec-16 | 2.05% | Jun-17 expiry | UKX is heavily exposed to EU (50% revenues) and should underperform SPX if GBP tailwind fades. Volatility & correlation suit well for outperformance
Long XLF vs SX7E Jun17 ATM outperf call, contingent on SX7E higher at Jun expiry (qEUR) | 2-Dec-16 | 1.20% | Jun-17 expiry | Cheapen long XLF upside to near 8y lows via selling upside on structurally challenged European banks & relatively more bearish outlook for US rates vs EU
Buy SPX Jun17 95% put contingent on US 5Y CMS > 2.15 | 5-Dec-16 | 1.04% | Jun-17 expiry | Still depressed equity-bond correlation (US 5Y bonds vs. SPX in the 37th%-ile since Jun-88) cheapens the cost of SPX puts conditioned on higher rates
Buy 1x Jun-17 ATM XLF call, sell 1.8x Jun-17 ATM worst-of calls on XLP and XLU | 5-Dec-16 | 2.10% | Jun-17 expiry | Participate in the continuation of the reflation trade. Cheapen Financials upside by selling rich Utilities and Staples vol & expensive correl.
Buy Jun-17 ATM R2K- value outperf call over EEM, contingent on EEM > 95% | 5-Dec-16 | 2.30% | Jun-17 expiry | Higher US rates and stronger dollar are likely to hurt companies exposed to EM and help US DM. Trade the outperformance in a risk-controlled way, avoiding selling the record-low correlation
Buy NKY Jun17 110% Call | 02-Dec-16 | 1.83% | Jun-17 expiry | USDJPY and NKY the biggest beneficiaries of a Trump win
Buy TPINSU Jun17 110-125% Call Spread | 02-Dec-16 | 3.30% | Jun-17 expiry | Banks and Insurances are the most leveraged sector
Buy TPNBNK Jun17 110-125% Call Spread | 02-Dec-16 | 3.20% | Jun-17 expiry | Banks and Insurances are the most leveraged sector
Buy 2823 HK Jun17 90/110% strangle | 02-Dec-16 | 5.90% | Jun-17 expiry | China risk premium rising but A-shares vol still at all-time lows
Buy HSCEI Jun17 105-120% call spread contingent on SKRW >1200 | 02-Dec-16 | 1.20% | Jun-17 expiry | Own contrarian EM upside at low cost & limited risk
Buy NKY-SPX Dec19 70/110% corridor variance | 02-Dec-16 | 1.50% | Dec-19 expiry | QE uncertainty and USDJPY vol support NKY vs SPX realized vol
Buy NKY Jun17-Jun18 18,500 strike FVA | 02-Dec-16 | 21.5% | Jun-17 expiry | What if QE hits its limit? Long NKY vol outright which is cheap to carry
Long Russell 2000 vs. short S&P 500 Dec-18 var spread | 5-Dec-16 | 3.9pts | Dec-18 expiry | With fiscal stimulus and potential tax cuts, small caps revert to old normal generating higher vol on upside and downside relative to large caps
Buy 1x Jun17 64 call on Aug17 Brent futures, sell 1x SXEP Jun17 330 call | 9-Jan-17 | 1.00% | Jun-17 expiry | Vol and price technicals are attractive. BofAML commodity strategists oil target is $70/bbl but this is already priced in SXEP levels according to BofAML Oil & Gas equity analysts
Buy SPX 6m ATM call contingent on GLD 5% higher in 3m | 23-Jan-17 | 1% | Jul-17 expiry | Position for a near-term wobble followed by yet another equity melt up
Long NKY - SPX Dec-18 corridor var replication | 13-Feb-17 | 4.00% | Dec-18 expiry | Cheaply access positive carry QE failure hedge
Buy NDX Top20 volatility dispersion | 27-Feb-17 | 17.0% | Jan-18 expiry
Long 1.8x vega on 1y single stock vols of UK Brexit exposed names, Short 1x vega on 1y FTSE index vol | 14-Mar-17 | 32.3vols | 14-Mar-18 | Position for a pick-up in single stock realised vol on the 10 names (within FTSE's top 30) where post EU referendum realised vol was the highest relative to current 1y ATMf vol. The 10 names are: Barclays, Aviva, Prudential, BT, Glencore, Tesco, CRH, BA, Standard Chartered & HSBC.
SPX Sep-17 95% puts conditional on the 5yr CMS rate above 2.4% at maturity | 14-Mar-17 | 1% | Sep-17, expiry | Hedge portfolios against a buy-the-dip failure should a faster rate cycle ultimately jeopardize it
Buy QQQ Jun17 132 call, sell XLF Jun17 25 call | 20-Mar-17 | 0.57% | Jun-17 expiry | Sell rich Financials vol to fund cheap Tech upside
Buy Buy-Rated MSCI A-shares stocks & hedge with puts | 23-Mar-17 | 1.44% | Jun-17 expiry | Market may trade on the MSCI inclusion theme; Hedge with 2823 HK Jun17 95% put
Buy A-shares with highest MSCI impact & hedge with put | 23-Mar-17 | 1.44% | Jun-17 expiry | Market may trade on the MSCI inclusion theme; Hedge with 2823 HK Jun17 95% put
Own Japan stock vol via gamma weighted vol dispersion | 10-Apr-17 | 15.8% | Mar18 expiry | Historically attractive to own TOPIX Top 10 corridor gamma weighted volatility dispersion
Buy CNOOC Jul-17 95% puts vs. sell HSCEI 95% puts | 24-Apr-17 | 0.77% | Jul17 expiry | Hedge a rollover in China GDP and screen for cyclicals that could face pressure
Buy CH Merchant Bk Jul-17 18.5/17 put spread vs 22 call | 24-Apr-17 | 0.10% | Jul17 expiry | Hedge a rollover in China GDP and screen for cyclicals that could face pressure
Buy SX5E Dec17 3800 calls contingent on EURUSD > 1.1 at expiry | 8-May-17 | 1.3% | Dec17 expiry | Benefit from low vol, flat correl, likely hawkish ECB & (FX un-hedged) inflows into EU equities
Buy 1.5x KOSPI2 285 puts vs. short 1x SKRW 1160 call | 8-May-17 | 0.3% | Jul17 expiry | Leverage cheap equity vs. FX vols to own cheap tail protection
Buy EEM Aug17 39.5 put and sell EEM Aug17 37 put | 15-May-17 | 1.6% | Aug17, expiry | Buy cheap EM equity puts on near-record performance gap to commodities
Buy Dec17 105% call on an equally weighted basket of SX7E, SXAP, SXPP & SXEP, sell Dec17 ATM worst-of call on the same | 15-May-17 | 1.6% | Dec17 expiry | Monetise low vol & high implied correl to position for greater sector dispersion in EU: long basket call, short worst-of call
Buy NKY Jul-17 19500 puts vs. short Dec-17 17500 puts | 15-May-17 | 0.0% | Jul17 expiry | Own cheap NKY hedges into FOMC; Term structure is too steep is under-pricing risks
Short GILD $55-$62.5-$67.5 put spread collar | 16-May-17 | 1.5% | Sep-17 expiry | Buy unloved and cheap biotech upside by levering depressed vol & skew
Long NKY vs short SPX Dec18 var swap | 5-Jul-16 | 5.7 vols | Dec-18 expiry
Long SX5E vs short SPX Dec18 put vs put | 5-Jul-16 | 0.00% |
Buy a 1Y ATM worst-of call on SPX & TLT | 18-Jul-16 | 0.9% | 1 year | Cheap equity upside in a bond / equity melt-up
Buy SPX>UKX Jun17 ATM outperformance call, conditioned on SPX lower at maturity (qUSD) | 17-Oct-16 | 2.0% | Jun-17 expiry | Risks of a hard Brexit rising and (weak) currency tailwind likely to prove short-lived; position cheaply for FTSE 100 (UKX) underperformance
Buy UKX Jun17 6650 put, sell SPX Jun17 1850 put | 17-Oct-16 | 2.6% | Jun-17 expiry
Buy an EWZ Jun-17 40 call conditional on SPX<2200 at expiry | 24-Oct-16 | 1.7% | Jun-17 expiry | Using derivatives to capture Brazil (EWZ) upside potential following start of easing cycle
Buy an SX5E Sep-17 95% put conditional on EUR 10Y CMS > 1.1% or < 0.3% in Mar-17 | 14-Nov-16 | 2.7% | Sep-17 expiry | Remain long equities and cheapen hedges by conditioning on rates
Buy 2823 HK Jun-17 90/110 strangle | 21-Nov-16 | 5.55% | Jun-17 expiry | China risk premium rising but A-shares vol still at all-time lows
Buy ESTX50 Dec17 90% put contingent on EURGBP < 0.82 by Jun17 expiry | 2-Dec-16 | 1.63% | Dec-17 expiry | Equity-FX correlation is not priced for a spillover of populism into the EU, which could cause EUR to fall against an already weakened GBP as equities fall
Buy SPX>UKX Jun17 5% outperformance call (qUSD) | 2-Dec-16 | 2.05% | Jun-17 expiry | UKX is heavily exposed to EU (50% revenues) and should underperform SPX if GBP tailwind fades. Volatility & correlation suit well for outperformance
Long XLF vs SX7E Jun17 ATM outperf call, contingent on SX7E higher at Jun expiry (qEUR) | 2-Dec-16 | 1.20% | Jun-17 expiry | Cheapen long XLF upside to near 8y lows via selling upside on structurally challenged European banks & relatively more bearish outlook for US rates vs EU
Buy SPX Jun17 95% put contingent on US 5Y CMS > 2.15 | 5-Dec-16 | 1.04% | Jun-17 expiry | Still depressed equity-bond correlation (US 5Y bonds vs. SPX in the 37th%-ile since Jun-88) cheapens the cost of SPX puts conditioned on higher rates
Buy 1x Jun-17 ATM XLF call, sell 1.8x Jun-17 ATM worst-of calls on XLP and XLU | 5-Dec-16 | 2.10% | Jun-17 expiry | Participate in the continuation of the reflation trade. Cheapen Financials upside by selling rich Utilities and Staples vol & expensive correl.
Buy Jun-17 ATM R2K- value outperf call over EEM, contingent on EEM > 95% | 5-Dec-16 | 2.30% | Jun-17 expiry | Higher US rates and stronger dollar are likely to hurt companies exposed to EM and help US DM. Trade the outperformance in a risk-controlled way, avoiding selling the record-low correlation
Buy NKY Jun17 110% Call | 02-Dec-16 | 1.83% | Jun-17 expiry | USDJPY and NKY the biggest beneficiaries of a Trump win
Buy TPINSU Jun17 110-125% Call Spread | 02-Dec-16 | 3.30% | Jun-17 expiry | Banks and Insurances are the most leveraged sector
Buy TPNBNK Jun17 110-125% Call Spread | 02-Dec-16 | 3.20% | Jun-17 expiry | Banks and Insurances are the most leveraged sector
Buy 2823 HK Jun17 90/110% strangle | 02-Dec-16 | 5.90% | Jun-17 expiry | China risk premium rising but A-shares vol still at all-time lows
Buy HSCEI Jun17 105-120% call spread contingent on SKRW >1200 | 02-Dec-16 | 1.20% | Jun-17 expiry | Own contrarian EM upside at low cost & limited risk
Buy NKY-SPX Dec19 70/110% corridor variance | 02-Dec-16 | 1.50% | Dec-19 expiry | QE uncertainty and USDJPY vol support NKY vs SPX realized vol
Buy NKY Jun17-Jun18 18,500 strike FVA | 02-Dec-16 | 21.5% | Jun-17 expiry | What if QE hits its limit? Long NKY vol outright which is cheap to carry
Long Russell 2000 vs. short S&P 500 Dec-18 var spread | 5-Dec-16 | 3.9pts | Dec-18 expiry | With fiscal stimulus and potential tax cuts, small caps revert to old normal generating higher vol on upside and downside relative to large caps
Buy 1x Jun17 64 call on Aug17 Brent futures, sell 1x SXEP Jun17 330 call | 9-Jan-17 | 1.00% | Jun-17 expiry | Vol and price technicals are attractive. BofAML commodity strategists oil target is $70/bbl but this is already priced in SXEP levels according to BofAML Oil & Gas equity analysts
Buy SPX 6m ATM call contingent on GLD 5% higher in 3m | 23-Jan-17 | 1% | Jul-17 expiry | Position for a near-term wobble followed by yet another equity melt up
Long NKY - SPX Dec-18 corridor var replication | 13-Feb-17 | 4.00% | Dec-18 expiry | Cheaply access positive carry QE failure hedge
Buy NDX Top20 volatility dispersion | 27-Feb-17 | 17.0% | Jan-18 expiry
Long 1.8x vega on 1y single stock vols of UK Brexit exposed names, Short 1x vega on 1y FTSE index vol | 14-Mar-17 | 32.3vols | 14-Mar-18 | Position for a pick-up in single stock realised vol on the 10 names (within FTSE's top 30) where post EU referendum realised vol was the highest relative to current 1y ATMf vol. The 10 names are: Barclays, Aviva, Prudential, BT, Glencore, Tesco, CRH, BA, Standard Chartered & HSBC.
SPX Sep-17 95% puts conditional on the 5yr CMS rate above 2.4% at maturity | 14-Mar-17 | 1% | Sep-17, expiry | Hedge portfolios against a buy-the-dip failure should a faster rate cycle ultimately jeopardize it
Buy QQQ Jun17 132 call, sell XLF Jun17 25 call | 20-Mar-17 | 0.57% | Jun-17 expiry | Sell rich Financials vol to fund cheap Tech upside
Buy Buy-Rated MSCI A-shares stocks & hedge with puts | 23-Mar-17 | 1.44% | Jun-17 expiry | Market may trade on the MSCI inclusion theme; Hedge with 2823 HK Jun17 95% put
Buy A-shares with highest MSCI impact & hedge with put | 23-Mar-17 | 1.44% | Jun-17 expiry | Market may trade on the MSCI inclusion theme; Hedge with 2823 HK Jun17 95% put
Own Japan stock vol via gamma weighted vol dispersion | 10-Apr-17 | 15.8% | Mar18 expiry | Historically attractive to own TOPIX Top 10 corridor gamma weighted volatility dispersion
Buy CNOOC Jul-17 95% puts vs. sell HSCEI 95% puts | 24-Apr-17 | 0.77% | Jul17 expiry | Hedge a rollover in China GDP and screen for cyclicals that could face pressure
Buy CH Merchant Bk Jul-17 18.5/17 put spread vs 22 call | 24-Apr-17 | 0.10% | Jul17 expiry | Hedge a rollover in China GDP and screen for cyclicals that could face pressure
Buy SX5E Dec17 3800 calls contingent on EURUSD > 1.1 at expiry | 8-May-17 | 1.3% | Dec17 expiry | Benefit from low vol, flat correl, likely hawkish ECB & (FX un-hedged) inflows into EU equities
Buy 1.5x KOSPI2 285 puts vs. short 1x SKRW 1160 call | 8-May-17 | 0.3% | Jul17 expiry | Leverage cheap equity vs. FX vols to own cheap tail protection
Buy EEM Aug17 39.5 put and sell EEM Aug17 37 put | 15-May-17 | 1.6% | Aug17, expiry | Buy cheap EM equity puts on near-record performance gap to commodities
Buy Dec17 105% call on an equally weighted basket of SX7E, SXAP, SXPP & SXEP, sell Dec17 ATM worst-of call on the same | 15-May-17 | 1.6% | Dec17 expiry | Monetise low vol & high implied correl to position for greater sector dispersion in EU: long basket call, short worst-of call
Buy NKY Jul-17 19500 puts vs. short Dec-17 17500 puts | 15-May-17 | 0.0% | Jul17 expiry | Own cheap NKY hedges into FOMC; Term structure is too steep is under-pricing risks
Short GILD $55-$62.5-$67.5 put spread collar | 16-May-17 | 1.5% | Sep-17 expiry | Buy unloved and cheap biotech upside by levering depressed vol & skew
Bank of America Merrill Lynch
Global Equity Volatility Insights | 06 June 2017 23
HOUSE_OVERSIGHT_023597
Global Equity Volatility Insights | 06 June 2017 23
HOUSE_OVERSIGHT_023597
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