UBS Investment Bank
Sales and Trading Commentary
Not a product of the UBS Research department
1st August 2013
Catley Lakeman Securities
UBS Equity Deriv Strategy
Pete Clarke (pete.clarke@ubs.com)
+44 207 567 9228
Kieran Diamond (kieran.diamond@ubs.com)
+44 207 568 0126
Bhavin Patel (bhavin.patel@ubs.com)
+44 207 567 9777
Sources: UBS Equity Derivatives Strategy, Bloomberg, 1st August 2013
1 of 7
Vols are down significantly across the board as we go into the August period – VIX spot and futures levels on
lows.
VIX-Historical Levels
60%
VIX futures are at their 3yr lows across all maturities
Current
45
24-Jun-13
40
95th %ile
35
30%
75th %ile
30
20%
50th %ile /
Median
25
10%
25th %ile
20
50%
VIX
nov13 futures level
40%
5th %ile
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
0%
Sources: UBS Equity Derivatives Strategy, Bloomberg, 1st August 2013
15
Aug-13
2 of 7
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Current Spot
Change on Wk
(Rebased vs Dec05)
Percentile
5831.7
↓ -3.3%
9641.1
↑ 2.4%
75.2
↑ 0.6%
103.4
↓ -1.1%
246.5
↑ 1.4%
21850.2
↑ 2.0%
39.3
↓ -0.9%
168.6
↓ -0.5%
8084.5
↓ -0.3%
44.2
↓ -0.7%
6560.3
↓ -0.9%
4368.0
↓ -0.9%
7814.1
↓ -1.4%
13661.1
↓ -6.8%
2741.7
↑ 0.6%
88.6%
22.2%
99.0%
100.0%
61.1%
49.0%
33.3%
99.3%
68.0%
17.0%
94.6%
75.9%
77.8%
71.8%
34.6%
290%
Index pts
WoW % spot return
vs Since Dec05
Maximum
290%
240%
75% ile
190%
190%
Median
140%
140%
25% ile
90%
90%
Minimum
40%
40%
Index
Index
1y-3m ATM
3m
ATM on
Implied
Change
Wk
40
55
7
EEM US
SX5E
UKX
SX5E
IWM
US
DAX
2.1%
2.0%
1.5%
17.8%
17.6%
16.8%
↑ 0.20% ↓ -0.25% ↓ -0.20%
2
HSI
HSI
1.1%
16.8%
↑ 0.21%
10
SM I
KOSPI2
0.9%
-0.14%
↓16.0%
4
KOSPI2
TWSE
0.8%
14.7%
↑ 0.42%
37
TWSE
UKX
0.7%
14.4%
↓ -0.70%
Change
on Wk
Percentile
Percentile
0.4%
↑87.9%
74.4%
0.5%
↑83.5%
23.2%
-0.7%
↓ 61.2%
19.2%
-1.2%
↓ 50.6%
7.6%
0.7%
↑48.2%
5.1%
0.3%
↑48.7%
25.9%
4%
50%
2%
0.4%
↑90.4%
11.8%
-0.7%
↓ 79.2%
19.2%
-0.2%
↓ 76.8%
7.9%
0.5%
↑77.6%
16.9%
0.9%
↑88.0%
6.7%
0.6%
↑55.0%
20.1%
53
35
EWZ US HSCEI
SM
I
QQQ
US
0.0%
-0.2%
14.3%
13.7%
↑ 0.28% ↑ 0.25%
0.3%
↑45.9%
30.4%
0.1%
↑47.6%
0.6%
4%
50%
2%
HSCEI 95% ile = 56.5% , EEM US 95% ile = 58.3%
40%
0%
-2%
30%
-4%
-2%
30%
-4%
20%
-6%
20%
-6%
-8%
10%
-10%
-8%
10%
-10%
Percentile
15
NKY
SPY US
37.0%
1.0%
↑ 4.4%
92.7%
↑ 0.6%
35
HSCEI
NIFTY
24.4%
1.0%
↑ 4.1%
40.6%
↑ 1.1%
24.7%
80.1%
53
40
EWZ US EEM US
IWM
US 22.2%
DAX
24.0%
4.1%
0.0%
↓ 4.1%
↓ -0.2%
26.7%
33.8%
↑ 0.1%
↑ 0.2%
35.8%
31.5%
2
HSI
EEM
US
18.9%
0.4%
↑ 3.9%
48.1%
↑ 0.3%
10
SM I
SX5E
18.4%
0.1%
↑ 3.5%
70.6%
↑ 0.3%
47.3%
14.0%
55
8
3
SX5E
NIFTY
DAX
QQQ
SM I
18.0%US EWZ
17.9%US 17.3%
3.5%
3.1%
0.2%
↓ -0.1%
↑ 3.3%
↑ 0.0%
36.1%
35.1%
41.6%
↑ 0.0%
↑ 0.4%
↓ 0.0%
16.3%
37.1%
7.6%
4
KOSPI2
UKX
16.7%
3.0%
↓ -0.1%
31.4%
↑ 0.0%
7
UKX
NKY
16.0%
0.0%
↑ 2.5%
46.0%
↑ 0.4%
39
IWM US
HSI
15.1%
2.2%
↓ -0.7%
-0.3%
↓14.5%
37
TWSE
KOSPI2
14.4%
0.3%
↑ 2.2%
29.5%
↑ 0.0%
1
SPY US
HSCEI
12.3%
2.0%
↓ -0.2%
28.0%
↑ 0.0%
6
QQQ US
TWSE
12.3%
1.0%
↓ -0.1%
0.2%
↑4.6%
1.9%
42.9%
35.2%
23.8%
40.8%
2.7%
60%
7%
50%
SKEW
REALISED
(95%
-105% )
(3M )
HSCEI 95% ile= 67.2% ; EEM 95% ile=69.2%
95%
ileile
95%
75%
ileile
75%
Median
Median
25%
ileile
25%
(5%
))
(5%
Current
Current
Last
Lastweek
week
0.1
80.0%
Vol pts
Volpt
pts
spread
Vol
change
Vol
pt change
vs
Since
Dec05
vs Since Dec05
60%
95% ile
7%
50%
95% ile
75% ile
6%
40%
6%
40%
5%
30%
4%
20%
3%
5%
30%
4%
20%
3%
10%
2%
10%
2%
0%
1%
0%
1%
Current
(5% )
Last week
Current
0%
0%
Last week
Index
3m Richness
Change on Wk
Percentile
(3M ATM -3M )
15
NKY
SPY
US Vol pts spread
-2.2%
13.0%
Volpts
pt change
↓ -1.29% Vol
0.4% Vol
pt change
↑24.5%
vs Since
Dec05
17.6%
vs Since Dec05
40%
0%
Index
Index
3m
Realised
3m 95%on
-105%
Change
Wk
Change on Wk
Percentile
RICHNESS
Current
Last week
8
6
1
39
3
NIFTY
QQQ US SPY US IWM US
DAX
NKY
EWZ
US HSCEI
EEM
US
NIFTY
3.7%
3.4%
2.5%
2.3%
2.2%
25.4%
23.9%
22.1%
20.6%
18.8%
↑ 0.38% ↓ -0.32% ↓ -0.26% ↓ -0.48% ↓ -0.18%
(3M ATM )
TERM STRUCTURE
IM PLIED
(1Y-3M
ATM )
SPOT
Vols on lows and skews generally quite flat, with most indices having rallied a long way from 1yr lows –
arguably not the best of times to be aggressively selling puts (worth bearing this in mind re: RCs and
autocallables).
240%
IWM US QQQ US
2.5%
1.4%
↑ 1.6%
↑ 0.2%
42.0%
34.3%
NIFTY
0.9%
↑ 0.2%
SPY US
0.6%
↑ 0.6%
TWSE
0.3%
↑ 0.5%
EWZ US
0.0%
↑ 0.4%
SX5E
-0.1%
↑ 0.6%
DAX
-0.5%
↑ 0.6%
KOSPI2
-0.8%
↓ -1.1%
UKX
-1.6%
↑ 0.3%
EEM US
-1.6%
↓ 0.0%
HSI
-2.1%
↓ -1.2%
HSCEI
-2.3%
↓ -1.8%
SM I
-4.1%
↑ 0.2%
23.2%
29.6%
19.7%
34.0%
31.0%
28.2%
22.3%
15.3%
24.3%
13.7%
21.6%
8.5%
75% ile
Median
Median
25% ile
25% ile
(5% )
NKY
-11.6% Vol pts
↓ -0.5% Vol pt change
4.7%
vs Since Dec05
15%
15%
10%
10%
5%
5%
0%
0%
-5%
-5%
95% ile
75% ile
Median
25% ile
Sources: UBS Equity
Derivatives Strategy, Bloomberg, 1st August 2013
-10%
3 of 7
(5% )
-10%
Current
The only metric lower than volatility is interest rates! Yield based structured products are therefore still the main
focus. Trading interest is increasingly shifting away from short puts and towards long calls though (ideally without
the bond!).
Rates vs Vols - Should drive structured-products demand
45%
6
High vol, lower rates
- yield products appeal
40%
35%
30%
5
4
25%
3
20%
15%
2
10%
Higher yields, lower vols
- participation should be
more attractive
2y ATM Implied Vol
5%
2y € Rates
1
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
0
Jan-02
0%
Eurostoxx Since 2002
5000
4500
Spot
4000
3500
3000
2500
2000
1500
1000
500
Sources: UBS Equity Derivatives Strategy, Bloomberg, 1st August 2013
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
0
4 of 7
Big variations in global equity performance – interest in catch-up trades (for e.g. Europe and China vs US) –
outright longs, long calls, dividends, outperformance structures:
Index Spot Performance (Rebased)
170%
QQQ US Spot : ↑ +0.5%
160%
IWM US Spot : ↓ -1.1%
150%
SPY US Spot : ↓ -0.6%
140%
KOSPI2 Spot : ↑ +1.4%
130%
UKX Spot : ↓ -0.9%
TWSE Spot : ↓ -0.3%
120%
NIFTY Spot : ↓ -3.3%
110%
SMI Spot : ↓ -1.4%
100%
NKY Spot : ↓ -6.8%
90%
EFA US Spot : ↓ -1.3%
80%
EEM US Spot : ↓ -0.7%
DAX Spot : ↓ -0.9%
70%
AS51 Spot : ↑ +0.9%
60%
HSI Spot : ↑ +2.0%
Sources: UBS Equity Derivatives Strategy, Bloomberg, 1st August 2013
5 of 7
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
HSCEI Spot : ↑ +2.4%
Jan-09
40%
Jul-08
SX5E Spot : ↑ +0.6%
Jan-08
50%
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Sources: UBS Equity Derivatives Strategy, Bloomberg, 1st August 2013
6 of 7
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Statement of Risk

Options, structured derivative products and futures are not suitable for all investors, and trading in these instruments is considered risky and may be appropriate only for sophisticated investors. Mortgage and
asset-backed securities may involve a high degree of risk and may be highly volatile in response to fluctuations in interest rates and other market conditions. Past performance is not necessarily indicative of
future results. Various theoretical explanations of the risks associated with these instruments have been published. Prior to buying or selling an option, and for the complete risks relating to options, U.S.
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Sources: UBS Equity Derivatives Strategy, Bloomberg, 1st August 2013
7 of 7