Global Equity Volatility Insights: Are levered ETFs a threat?

Research evidence excerpt

Global Equity Volatility Insights: Are levered ETFs a threat?

ak Vega leaves room for an additional convexity kicker Nitin Saksena

if dealer Vega supply turns into demand in a downside scenario where NDX, and by Equity-LinkedBofAS Analyst

extension the AI trade, succumbs to a bust. Our hypothetical backtest shows the daily Abhinandan Deb >>

delta-hedged strategy would have been up YTD, unlike for the SPX. For investors looking Equity-Linked Analyst

to improve trade carry, skew-adjusted delta hedging offers better long-run carry costs MLI (UK)

and greater exposure to upside fragility at the expense of some downside convexity. Nicholas Dunne Equity-Linked Analyst

BofAS

ENR’s ascent reshapes SXEP: Fund AI upside w. SXEP put Lars Naeckter >>

The apparent end of the Iran conflict has triggered a historic oil price collapse, with Brent Equity-Linked Analyst Merrill Lynch (DIFC)

down 22% and EU energy equities (SXEP) weakening alongside. However, SXEP's decline

Benjamin Bowler

looks excessive, with the sector materially underperforming its oil-beta-adjusted return Equity-Linked Analyst

despite lingering uncertainty around the durability of “interim” geopolitical resolutions. BofAS benjamin.bowler@bofa.com

Beneath the surface, the index is also undergoing a structural shift as AI-linked beneficiary

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ENR gains influence and increasingly decouples from the sector’s usual oil & geopolitical

drivers, pressuring index vol lower. These dynamics create an opportunity to fund upside

Exhibit 1: 3M volatility (weekly chg)

exposure to Europe’s AI-beneficiary via ENR Sep26 call spreads, funded by short SXEP Level & changes (in parentheses) in vol pts

puts, where vol may remain pressured as the sector itself finds support.

Implied Realized