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Chart 17: SXEP calls would have generated a higher average payoff and more frequent positive returns vs. USO calls (when sized for an upfront cost equal to the current price of the USO 3M 25d put)
Avg Payoff Freq of >0
2.1x SXEP 3M 25d calls: 2.9% 27%
1.3x USO 3M 25d calls: 1.4% 10%
[Chart showing SXEP Call Payoff vs USO Call Payoff from '08 to '16]
Source: BofA Merrill Lynch Global Research. Data from 1-Jan-16 to 5-Aug-16. Backtesting is hypothetical in nature and reflects application of the screen prior to its introduction. It is not intended to be indicative of future performance.

Chart 18: Selling the USO 25d put (~8.7 strike as of 5-Aug) to buy the SXEP 42d call (~280 strike as of 5-Aug) for ~0 provides early upside participation and a ~12% downside buffer on the short USO put leg
[Line Graph showing SXEP vs USO (rhs) from Jan16 to Jul16]
Long SXEP call strike (unlevered implementation)
Short USO put strike
Source: BofA Merrill Lynch Global Research. Data from 1-Jan-16 to 5-Aug-16. Backtesting is hypothetical in nature and reflects application of the screen prior to its introduction. It is not intended to be indicative of future performance.

Chart 19: Number of bonds purchased by the ECB in their CSPP programme by sector
[Bar Chart showing # Bonds Purchased and % of Eligible by sector: Utilities, Consumer, Non-..., Industrial, Communications, Consumer, Cyclical, Financial, Energy, Basic Materials, Technology, Diversified]
Source: BofA Merrill Lynch Global Research.

Chart 20: Oil drawdowns have recently coincided with $ weakening
Negative correlation would have helped dampen potential USD losses on the short USO put leg
[Line Graph showing USO vs EURUSD correlation* and Conditional on USO down from '07 to '16]
Source: BofA Merrill Lynch Global Research. Data from 18-Apr-07 to 5-Aug-16.

Bank of America Merrill Lynch
Global Equity Volatility Insights | 09 August 2016 11
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