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Chart 22: May has typically been the month with the least amount of ESTX50 realised volatility. This has also been true in 2017 thus far
Average ESTX50 realised vol vs. May
12%
10%
8%
6%
4%
2%
0%
-2%
'07 to '17
'87 to '97
'97 to '07
Overall trend ('87 to '17)
2017 YTD
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: BofA Merrill Lynch Global Research. Data: 1-Jan-87 to 16-Jun-17.

The overall seasonality in ESTX50 realised volatility since 1987 (ESTX50 inception) has been one of relatively lower vol during the summer months vs. autumn. In particular, May stands out as the lowest vol month across most 10 year horizons, and this also appears to be the case so far this year. We note that Apr-17 vol stands out mainly due to the 4% ESTX50 move on the Monday following the first round of the French presidential elections.

Chart 23: ESTX50 1M 100-110 call skew is near-flattest since 2008
12%
10%
8%
6%
4%
2%
0%
-2%
SX5E 1M 100-110 (%fwd) call skew
Current
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Source: BofA Merrill Lynch Global Research. Data: 2-Jan-08 to 16-Jun-17.

ESTX50 short-dated (1M) 100-110 (%fwd) call skew has flattened considerably since pre-French election (23-Apr) levels and currently stands near 9 year+ lows. Consequently, limited upside structures (e.g., call spreads) price attractively both from an ATMf volatility and skew basis.

Table 4: Volatility measures of major equity indices in the EMEA region (data as of 16-Jun-17)
3Mth ATM implied volatility | 10D realised volatility | 12Mth–3Mth ATM i-vol spread | 3Mth 90-110 skew | Equity index Weekly return
Weekly Current change 2Yr percentile | Weekly Current change 2Yr percentile | Weekly Current change 2Yr percentile | Weekly Current change 2Yr percentile
ESTX50 13.4% 0.3% 2% | 9.6% 2.0% 17% | 3.4% -0.2% 99% | 8.4% 0.9% 72% | -1.2%
FTSE 10.0% -0.4% 1% | 8.6% 1.1% 24% | 3.6% 0.2% 100% | 6.2% 0.2% 9% | -0.8%
DAX 12.6% 0.3% 1% | 12.7% 2.9% 29% | 3.9% -0.2% 100% | 8.5% 0.7% 67% | -0.5%
CAC 13.3% 0.3% 3% | 10.3% 2.0% 21% | 2.6% -0.1% 100% | 8.6% 1.2% 77% | -0.7%
SMI 11.4% -0.1% 3% | 12.2% 3.3% 44% | 2.4% -0.1% 96% | 6.5% 0.1% 27% | 1.3%
RDXUSD 25.9% 0.9% 29% | 16.2% -1.2% 17% | 0.9% -0.4% 58% | 5.2% 0.4% 27% | -3.7%
TOP40 16.9% 1.3% 17% | 10.6% 0.2% 15% | 1.7% -0.5% 47% | 8.0% 0.4% 36% | -3.0%
ISE30 20.2% 0.4% 6% | 10.1% -1.4% 5% | 3.1% -0.3% 81% | 6.9% 0.1% 74% | -0.8%
Source: BofA Merrill Lynch Global Research

14 Global Equity Volatility Insights | 20 June 2017
Bank of America Merrill Lynch
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