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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. Table 6: Summary of open trades as of 5-Jun-17 Open Open Expected Trade Trade Description Rationale Date Level Term Long SX5E vs short SPX Dec18 var swap 5-Jul16 6.1 vols Investors should re-assess attractiveness of popular and {typically} technically motivated longer- Long NKY vs short SPX Dec18 var swap 5-Jul-16 5.7 vols Dec-18 expiry dated RV vol trades, given environment of structurally higher political & economic risks and Long SXSE vs short SPX Dec‘8 put vs put 5-Jul-16 0.00% increasingly limited policy options Buy a 1Y ATM worst-of call on SPX & TLT 18-Jul-16 0.9% year Cheap equity upside in a bond / equity melt-up Buy SPX>UKX Jun17 ATM outperformance call, conditioned on SPX lower 17-Oct-16 2.0% Jun-17 expiry . a vay . es . Risks of a hard Brexit rising and (weak) currency tailwind likely to prove short-lived; position abmaluiny USD) heaply for ETSE 100 (UKX) underperf cheaply for underperformance Buy UKX Jun17 6650 put, sell SPX Jun17 1850 put 17-Oct-16 2.6% Jun-17 expiry i R 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 SXSE Sep-17 95% put conditional on EUR 10Y CMS > 1.1% or < . . . ao. : 14-Nov-16 2.7% Sep-17 expiry Remain long equities and cheapen hedges by conditioning on rates 0.3% in Mar-17 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 . . . Equity-FX correlation is not priced for a spillover of populism into the EU, which could cause EUR Buy ESTX50 Dect? 90% put contingent on EURGBP < 0.82 by Jun17 expiry 2-Dec-16 1.63% Dec-17 expiry ; . (0 fall against an already weakened GBP as equities fall , UKX is heavily exposed to EU (50% revenues) and should underperform SPX if GBP tailwind Buy SPX>UKX Jun17 5% outperformance call (qUSD) 2-Dec-16 2.05% — Jun-17 expiry . ; 7 fades. Volatility & correlation suit well for outperformance Long XLF vs SX7E Jun17 ATM outperf call, contingent on SX7E higher at >Dec16 1.20% 1 exoi Cheapen long XLF upside to near 8y lows via selling upside on structurally challenged European -Dec- : Jun-17 expin Jun expiry (qEUR) ° any banks & relatively more bearish outlook for US rates vs EU . . Still depressed equity-bond correlation (US SY bonds vs. SPX in the 37th%-ile since Jun-88) Buy SPX Jun17 95% put contingent on US 5Y CMS > 2.15 5-Dec-16 1.04% — Jun-17 expiry . : 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 . Participate in the continuation of the reflation trade. Cheapen Financials upside by selling rich 5-Dec-16 2.10% Jun-17 expiry ; and XLU Utilities and Staples vol & expensive correl. 7 Higher US rates and stronger dollar are likely to hurt companies exposed to EM and help US DM. Buy Jun-17 ATM R2kK- value outperf call over EEM, contingent on EEM > . i, 95% 5-Dec-16 2.30% — Jun-17 expiry 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 Junt7 90/1 10% 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 $KRW >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 With fiscal stimul id potential tax cut: ll rt to old ting higher vol Long Russell 2000 vs. short S&P 500 Dec-18 var spread 5-Dec-16 3.9pts Dec-18 expiry ‘seal simutus an pe en TRONS (STU SAPSLSVSINIGEOIG DotTTG! Ge nerallng Nghe ve on upside and downside relative to large caps Vol and price technical: tractive. BofAML dity strategists oil target is $70/bbl but thi Buy 1x Jun17 64 call on Aug17 Brent futures, sell 1x SXEP Jun17 330 call 9-Jan-17 1.00% = Jun-17 expiry . oan pile eel mals ate alracive “° comme ' ystelsg> $ oll target is $ uns 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 ly single stock vols of UK Brexit exoosed names Position for a pick-up in single stock realised vol on the 10 names (within FTSE’s top 30) where Suan ty _ on { Tee waidexeval P , 14-Mar-17 32.3vols 14-Mar-18 post EU referendum realised vol was the highest relative to current ty ATMf vol. The 10 names g y are: Barclays, Aviva, Prudential, BT, Glencore, Tesco, CRH, BA, Standard Chartered & HSBC. 3 9) ity 9 anes ROR TISEGAITNE Gi 1 YPN ARATE ARE 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% — Jul1? 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% — Jult7 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% Dec? 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 $KRW 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 Monetise low vol & high implied correl to position for greater sector dispersion in EU: long basket 15-May-17 1.6% Dect? expiry 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 Bankof America . deg docs Merrill Lynch Global Equity Volatility Insights | O06 June 2017 = 23 HOUSE_OVERSIGHT_023597