HOUSE_OVERSIGHT_025997

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 worstof {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 d-Jul-16 d-Jul-16 d-Jul-16 d-Jul-16 d-Jul-16 d-Jul-16 d-Jul-16

1-Jul-

8-Jul-

Co ¢ =

20-Jul- 20-Jul- 20-J

25-Jul-

fa Gre ac ceic oo ec cle Sas T TOT TT TOT OT OT TT TT

1-Aug-

T DPF AXADDWAHWDDW WDD BWDDDWDODOD DH

for]

aD DOD MD

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%

35%

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

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-

fon] Om D fon]

Open Level

0.26%

5.9% 5.5% 46%

0.00%

0.24%

Close Level

1.23%

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

Global Equity Volatility Insights | 09 August 2016

BankofAmerica <2” Merrill Lynch

HOUSE_OVERSIGHT_025997