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Summary of Open Trades (08-Aug-16) Table 7: Summary of open trades as of 08-Aug-16 Trade Description Long SX5E vs short SPX Dec18 var swap Long NKY vs short SPX Dec18 var swap Long SX5E vs short SPX Dec18 put vs put Long 3M 25d EFA put vs short 3M 25d UKX put Buy CMB Sep16 105-115% call spread Buy ICBC Sep16 105-115% call spread Buy BOC Sep16 105-115% call spread Long 0.5x V2X Oct16 future, long 0.5x V2X Nov16 future, short V2X Jan-17 future Buy a 6M ATM worst-of call on XLP & GLD Buy a 6M ATM worst-of {SPX put, GLD call} Buy Oct16 110%f calls on VIE FP, Al FP, IBE SQ, STAN LN and MUV2 GY Buy an Oct16 110%F call on an equally weighted basket (quanto EUR) Buy TLS 25-Aug16 95% puts Buy CSL 25-Aug-16 95% puts Buy Newcrest 25-Aug-16 105/115% call spreads Buy BHP 25-Aug-16 105/115% call spreads Replace T long position via 3M ATM calls Replace LOW long position via 3M ATM calls Replace RTN long position via 3M ATM calls Replace CRM long position via 3M ATM calls Replace CRM long position via 3M ATM calls Overlay long WBA long position with 3M ATM calls Buy a 6M ATM best-of put on SPX & TLT Buy a 1Y ATM worst-of call on SPX & TLT Buy XLF Sep 24 strike call Buy XLU Sep 51 strike put Buy a 6M ATM worstof {XLF call, XLU put} Sell 1x SX7E 1M 25d call to fully finance 1.85x SX5E 1M 25d calls Short VIX Oct 15 put vs. long VIX Nov 19/26 call spread Buy HSCEI Aug16 9400 call, Short Oct16 10000 call 1-Aug- Open Date 5-Jul-16 5-Jul-16 5-Jul-16 5-Jul-16 5-Jul-16 5-Jul-16 5-Jul-16 1-Jul- 1-Jul- 8-Jul- (= co ¢ = 25-Jul- 29-Jul- 20-J 25-Jul- oO [a Ge ac ceic oo eg cle Sas T TOT TT TT OT OT TT TT = 1-Aug- T DPF AWD AAHADDWAWAWAAWDWAwADDWBDDOD DH cop] 6 mr DOD DH Open Level 6.1 vols 5.7 vols 0.00% 0.00% 2.32% 2.12% 2.10% 0.25 vols 1.05% 1.60% 2.37% 0.81% 1.05% 1.09% 2.64% 2.22% 2.12% 3.90% 3.16% 416% 2.32% 404% 0.8% 0.9% A% 3% 39% 0.0% 0.45 0.00% Trade Value 5.2 vols 4.9 vols -0.62% 0.16% 3.01% 417% 3.79% -0.28 vols 0.48% 1.01% 2.37% 0.69% 1.67% 0.72% 1.90% 1.26% 2.50% 3.66% 3.45% 3.50% 1.26% 249% 0.49% 0.83% 1.9% 2.5% 2.31% 0.28% $0.125 0.04% Expected Trade Term Dec-18 expiry 3 months Sep-16 SQ expiry Oct-16 expiry 6 months 6 months Oct-16 expiry Oct-16 expiry 25-Aug-16 3 months 3 months 6 months 1 year Sep-16 expiry 6 months 1 month Oct VIX expiry Aug-16 expiry Rationale 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 FTSE 3M 25d put vol near 7hr highs vs. vol on EFA Continuous Southbound inflow benefit financials sector and narrow AH premium Hedge further Brexit fallout, Italian bank & referendum risk Cheaply construct risk-limited “uber-barbell” portfolio Low-cost macro hedge for US equity portfolios Add exposure via inexpensive upside on single names where positioning appears particularly bearish and stocks have underperformed vs. their sectors To hedge potential earning downside surprise To hedge potential earnings upside surprises Our analysts expect positive and impactful catalysts in Q3-2016; recent strong performance and depressed short dated implied vol favor stock replacement via calls to reduce downside risk, maintain upside and lock in profits Position for accelerated upside returns ahead of closing the Rite Aid acquisition Cheap hedge against a bond tantrum Cheap equity upside in a bond / equity melt-up Record outperformance of Utilities vs. Financials + FMS positioning + central bank catalysts = potential for cyclicals / defensives mean reversion SX7E 1M 25d call / SX5E 1M 25d call price ratio is in the 100‘ 2-yr percentile Sell VIX Oct puts to leverage likely floor in vol ahead of US elections and cheapen shallow hedges Short-term bullish China trade with term structure at its steepest in 4yrs Source: BofA Merrill Lynch Global Research. Prices reflective of most recently available data which may be delayed in some cases. “Trade Value” represents current valuation of trades initiated on the “Open Date”. Summary of Closed Trades (08-Aug-16) Table 8: Summary of closed trades as of 08-Aug-16 Trade Description Buy NKY Aug-16 105%-110% call spreads & sell 90% puts Replace FB long positions via Oct-16 ATM calls Replace AMZN long positions via Oct-16 ATM calls Buy AAPL Oct-16 ATM protective puts Buy 1.5x 5-Aug-16 2950-3000 strangles by selling 1x 19-Aug-16 2950-3000 strangles Sell NKY Aug16 15500 puts, Buy Sep16 15500- 14500 put spreads Open Date 11-Jul- 25-Jul- 25-Jul- 25-Jul- 25-Jul- 25-Jul- for] rm DD for] 6 Open Level 0.26% 5.9% 5.5% 46% 0.00% 0.24% Close Level 1.73% 6.1% 6.3% 1.2% -1.12% 0.28% Close Date 25-Jul-16 1-Aug-16 1-Aug-16 1-Aug-16 5-Aug-16 Aug-16 expiry & Sep-16 expiry Rationale Take profit as the hurdle to surprise on the upside is high following a 5.8% NKY rally Take profit as Facebook rallied on better-than expected Q2 results Take profit as Amazon rallied on better-than expected Q2 results Remove protection as worries around disappointing Q4 guidance faded post earnings The BoJ, Fed & EU bank stress tests could move mkts sharply in the near term Unwinding before the Aug16 expiry; The NKY Sep put spread has carried well Source: BofA Merrill Lynch Global Research. Prices reflective of most recently available data which may be delayed in some cases. “Trade Value” represents current valuation of trades initiated on the “Open Date”. 20 Global Equity Volatility Insights | 09 August 2016 BankofAmerica <2” Merrill Lynch HOUSE_OVERSIGHT_025997