Market Volatility Bulletin

EQUITY DERIVATIVES STRATEGY
Weekly Market Commentary

September 28, 2020
Market Volatility Bulletin

Put Skew Collapses Despite Equity Sell-Off
Equity Derivatives Strategy Weekly
IMPLIED VOLS gained across asset classes last week as Exhibit 1: Asset Class Implied Vols (1Y Percentile)
US real yields rose to a 2-month high on fading stimulus hopes.
Not surprisingly, precious metals came under pressure as a 100%
result, with gold recording its biggest weekly loss since March. 90%
GLD 1M implied vol increased 2.5 pts to 17.9% while SLV vol 80%
jumped almost 6 pts to 43%. Credit vol also saw a notable 70%
Vol Percentile (1Y)

move, with CDX HY 1M implied vol up 14 pts to almost a 3- 60%
month high of 74%. Equity vol (VIX) and FX (G7) vol, by 50%
contrast, remained relatively stable at 26% (+0.6 pt wk/wk) and 40%
7.4% (+0.1 pt), respectively. Meanwhile, US rate vol continued 30%
to make new all-time lows, with the CIRVE Index ending the 20%
week at 39 nms. 10%
0%
7/1/20 7/15/20 7/29/20 8/12/20 8/26/20 9/9/20 9/23/20
EQUITY VOL: election vol premium widens; S&P fixed- US Equities (VIX) Oil Gold
strike vols were mostly unch’d across tenors last week, with the Int Rate FX (G7) Euro Equities (V2X)
Source: Credit Suisse Derivatives Strategy
exception of Nov-Jan which gained another 1pt wk/wk, leading
to even greater election “kink” in the vol term structure (see Exhibit 2: GLD Skew Turns Positive For First Time Since March
below). See election trade idea on pg 3. With Tech reversing
some of its recent losses, QQQ-SPX vol spread narrowed
further, with QQQ 3M ATM vol now trading just 6.5 pts above
SPX (vs a high of 12 pts earlier this month) – though still a long
way from its 5Y average spread of just 3.7%.
SKEW turns positive for gold; SPX convexity lower: S&P

skew and convexity have normalized significantly in recent
weeks, despite the weak equity tape. This is evident in the SPX
variance convexity premium, which has collapsed to its lowest
since March (whether measured as spread or ratio; see Exhibit
3). In the cross-asset space, gold 1M skew stands out on this
latest sell-off, where for the first time since March, puts are Source: Credit Suisse Derivatives Strategy
trading at a premium to calls (see Exhibit 2), as we’ve seen a
pickup in tactical hedging in the precious metals space given the Exhibit 3: SPX Var Convexity Premium Has Fallen Significantly
rise in real yields.
TERM STRUCTURE kink widens: S&P Dec vols continued to

get bid as traders price in rising probability of a contested
election. SPX 3M-1M vol spread is now back to near all-time
high of 5.3% as a result.
EQUITY CORRELATIONS muted on limited contagion: S&P

1M implied and realized correlations were both unch’d last week,
remaining at 38% and still screening around the 50th percentile.
Cross-asset volatility contagion fell sharply (down 6-12 pts
across asset classes; see pg 6), with the exception of equity-
gold as both assets sold off on falling breakevens/rising real
yields. Source: Credit Suisse Derivatives Strategy
Mandy Xu, CFA Anshul Gupta

mandy.xu@credit-suisse.com anshul.gupta.3@credit-suisse.com
(212) 325 9628 +44 208 888 8888
(212
***Not Intended for Retail***
(
September 28, 2020
EUROPE
CROSS-ASSET VOLS rose, as politics and pandemic continued Exhibit 4: Cross-asset vols gained, led by European equity vols
to weigh on the sentiment. EU equity vols led the way with -2
38
-1 0 1 2 3 4 5 6
12
US rates
FTSEMIB, SX5E & UKX 1M implieds gaining the most (~5v). As 6.0% 1y min-max range
USDJPY
a result, UKX vol is now most stressed across assets. Credit 33 1w ago 10
EU rates
spreads also drifted wider, with riskier (high yield) segment seeing EURUSD
6.5% Latest
the greatest impact - EU snr fin CDS was >20bps wider following EUR IG*
62 8
82
money laundering allegations on major banks. On the other hand, EUR HY*
20.5% Labels next to dots
FX vols were relatively stable while rates vol ticked marginally
6
NKY
10.4% indicate latest levels
lower, making a new all-time low in the process (Exhibit 4). GBPUSD
24.2% 4
SX5E
28.4%
EQUITY VOLS gained, led by SX7E (Banks) vol; While FTSEMIB
21.8% 2
SX5E 1M implied vol gained by 4.5v, fixed strike vols were only SPX
23.6%
marked marginally higher (~1v). With Value continuing to FTSE 0
underperform, SX7E stood out in particular down ~10% last -2 -1 0 1 2 3 4 5 6

week (within touching distance of all-time lows) and 1M vols Long-term z-score of 1M vols (*CDS spreads for credit, not vols)
were ~10v higher. Notably, Thursday was the biggest option Source: Credit Suisse Derivatives Strategy
volume day of the year for SX7E as investors dipped their toes
Exhibit 5: SX5E led the collapse in 1M put skew across indices
into some bullish trades ranging from Oct20 to Dec22 expiries.
PUT SKEW collapsed further, despite the sell-off in equities.

Notably, SX5E 1M 90-100 put skew has now dropped from 94th
percentile high in early Sep to 2nd percentile low (2y lookback,
Exhibit 5). This is likely a reflection of relative lack of panic
among market participants, lack of demand for tail protection
and a preference for hedges that cover moderate equity declines
(e.g. put spreads & put spread collars).
TERM STRUCTURE flattened from near 2y extremes, as

vols spiked higher. Indeed, the SX5E 3M-1M term structure,
which was in its 99.8th percentile a week ago is now trading in its
70th percentile (2y lookback). At the same time, long-dated (e.g.
2y-1y) term structure inverted further, creating attractive entry
point for forward vol trades such as FVAs and put calendars (see Source: Credit Suisse Derivatives Strategy
page 3 for related trade ideas).

Exhibit 6: SX5E dividend futures significantly underperformed vs SX5E
DIVIDEND futures collapsed amid auto-call dynamics;

SX5E dividend futures were lower across the curve last week,
almost 2x versus what their historical equity beta would suggest
(Exhibit 6). In addition to being hurt by the broader risk-off
sentiment, recovery concerns & banks facing money laundering
allegations, divs have also faced persistent headwinds from exo-
books given autocall dynamics. Notably, such exo dynamics have
also impacted FTSE div futures materially, which trade at the
largest discount to 2019 divs among global indices (page 11).
CORRELATION gained; The SX5E 1M implied correlation

gained by ~5pts to 54%, a relatively modest increase
considering a 5pt rise in the 1M index implied vol. Implied correl
is now in line with the recent 1M realised correl of 52%.
Source: Credit Suisse Derivatives Strategy
(212
(
Featured Equity Derivatives Trade Ideas

Buy RTY > SPX Outperformance Option
 On Friday, we published a detailed report looking at the market implications of a Trump vs Biden win. In our view, the most positive
outcome for risk markets at a macro level is a Democratic sweep given the potential for significantly higher fiscal stimulus, and
consequently, higher economic growth. Please contact the desk for the full note. CS Economics team also forecasts higher GDP
growth in a Dem sweep scenario. See Exhibit 1 for their forecasts (link to their full report).
 Specifically, CS Derivs Strategy sees potential for higher yields/steeper curve, cyclical stocks to outperform, and a more pronounced
rotation away from Growth into Value in a Dem sweep scenario. One way we like positioning for this in the equity market is through
Russell over SPX outperformance options. Small-cap Russell has lagged the SPX significantly in recent years as a value play, given its
high exposure to cyclical sectors and underweight in Tech. We think this underperformance could reverse if Dems pass a significant
fiscal package similar to the $3tr plan the House Democrats already passed in May.
 As a result, we like buying a 6M RTY>SPX 3% outperformance option, conditional on SPX also being up at expiry for
1.72% premium. The option pays out at expiry the excess difference in returns between RTY-SPX over 3% as long as SPX is also
up. The structure takes advantage of the elevated implied correlation between the two indices, and benefits from the decline in the
RTY-SPX vol spread in recent months (see Exhibit 2). ***The risk to buying an outperformance option is limited to the premium paid.
Exhibit 1: CS Economics forecasts for election scenarios Exhibit 2: RTY-SPX 6M Implied Volatility Spread
Source: CS Economics Research Source: CS Equity Derivatives Strategy
Monetise SX5E term structure inversion via FVAs/window KOs

 With a spike in shorter-dated vols amid the recent sell-off, long-dated SX5E term structure has inverted further (Exhibit 3 below).
Indeed, auto-call dynamics continue to exert meaningful pressure on long-dated implied vols as well as on div futures (see page 2).
 For investors who are cautious in the near-term, given uncertainty around US elections, virus resurgence, fiscal cliff, Brexit etc. but
see the scope for equities to break the current range once the cloud of uncertainty lifts, we suggest buying SX5E Jun21 or Dec21
3500 calls contingent on SX5E < 3500 in the near-term (e.g. Dec20). Such structures can provide 60-70% discount vs vanilla.
 What part of the curve offers most value? For a more direct monetization of curve inversion, we screen for the potential risk-reward
among various forward vol combinations. Specifically, we assume a 1y holding period and screen for the part of the curve where (i) roll
up/down is most attractive, (ii) there is limited downside to the 10th percentile level (when shifted by 1y) & (iii) most upside to median.
 SX5E 2y3y (Dec22/Dec23 equiv.) 80% put forward vol offers an attractive risk-reward. As seen from Exhibit 4, it has a
positive roll yield of ~2.5v (assuming the curve remains static, spot is unch & 2y3y point rolls up to 1y2y). Furthermore, it suggests a
gain of +6.4v & a loss of -0.7v if 1y2y 80% vol touches its median and 10th percentile (since 2008) respectively in 1 year time.
Exhibit 3: SX5E 3y-2y term structure is strongly inverted Exhibit 4: SX5E 2y/3y 80% put forward vol attractive to own
1.0% Percentile Implied Downside to 10th Upside to
Fwd Vol Current since 2008 roll* (A) percentile* (B) median* (C) -(A+C)/B
0.5%
2y3y.0.8 19.5% 19.0% 2.4% -0.7% 6.4% 12.8
0.0%
4y5y.1.2 18.1% 6.8% 0.1% -0.3% 3.6% 10.9
-0.5% 4y5y.1.4 17.6% 4.0% 0.1% -0.4% 3.8% 10.3
2y3y.0.9 18.4% 16.3% 1.9% -0.7% 4.5% 9.4
-1.0%
4y5y.1.1 18.3% 10.6% 0.1% -0.5% 3.7% 8.1
-1.5% 2y4y.0.8 19.6% 18.4% 1.1% -1.0% 5.8% 6.7
-2.0% 4y5y.1 18.5% 13.2% 0.0% -0.6% 4.0% 6.2
SX5E 3y-2y term structure 2y4y.0.9 18.6% 16.4% 0.8% -0.8% 4.1% 5.7
-2.5%
Latest (25-Sep) 2y3y.1 18.0% 15.3% 1.2% -1.0% 3.9% 5.4
-3.0% 4y5y.0.8 19.6% 15.7% 0.1% -1.1% 5.5% 5.3
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Source: CS Equity Derivatives Strategy * 1y holding period & spot unch, e.g. 2y3y.0.8
Source: CS Equity Derivatives Strategy vol rolls up to 1y2y.0.8 vol. Fwd vols shown are boot-strapped vols, not FVA levels
3
Cross-Asset Correlation & Contagion
4
Cross-Asset Volatility Analysis

Asset Class Implied and Realized Volatility
240% 100% 350% 100%
Asset Volatilities (1M Implied)
90% 300%
Asset Volatilities (1M Realized)

200% 80%
75%
70% 250%
160%
60% 200%
120% 50% 50%
40% 150%
80% 30% 100%
25%
40% 20%
50%
10%
0% 0% 0% 0%
7/1/20
9/1/19
1/1/20
2/1/20
3/1/20
4/1/20
5/1/20
6/1/20
8/1/20
9/1/20
10/1/19
11/1/19
12/1/19
7/1/20
9/1/19
1/1/20
2/1/20
3/1/20
4/1/20
5/1/20
6/1/20
8/1/20
9/1/20
10/1/19
11/1/19
12/1/19
VIX CDX (left axis) Oil (left axis)
VIX Oil (left axis) Rates (left axis) Gold FX (G7)
Rates (left axis) FX Gold
Source: CS Derivatives Strategy Source: CS Derivatives Strategy
Cross Asset Volatility Contagion Snapshot
How to read this chart: Equity volatility is represented by the dark blue circles at the bottom, whereas other asset volatilities are
represented by the light blue circles. The size of the circles represents the magnitude of each asset’s volatility relative to equity
volatility, while the size of overlap represents the degree of the volatility spillover onto equities.
Volatility Spillover: measures the degree of co-movement between equity volatility and the other asset class volatility. For example, a
volatility spillover number of 75% for an asset class means when that asset class volatility increases, 75% of the time, equity volatility
(VIX) will also increase. Please see page 5 for further details. Source: CS Derivatives Strategy
Cross Asset Correlation Snapshot (1M)
Equities Corporate Credit Commodities Foreign Exchange Rates

SPX RTY SX5E NKY EEM CDX IG LUCI US CDX HY Oil Gold Copper EURUSD GBPUSD AUDJPY USDJPY Tsy 10Y Tsy 30Y
SPX
RTY 86%
Equities
SX5E 37% 49%

NKY -27% -21% -5%
EEM 71% 71% 36% -42%
CDX IG -12% 20% 58% 4% -9%
Corporate
LUCI US -42% -53% -45% -4% -40% -16%

Credit
CDX HY -70% -68% -40% 15% -76% -4% 62%

Oil 38% 43% 34% -21% 39% 23% -37% -47%
Commodi-
Gold 19% 48% 23% -24% 32% 36% -28% -37% 20%
ties
Copper 46% 54% 15% -20% 36% 30% -51% -54% 18% 42%
EURUSD 16% 25% 4% -24% 32% 25% -28% -48% 34% 60% 44%
Exchange
Foreign
GBPUSD 55% 52% 12% -42% 60% 4% -40% -54% 69% 22% 41% 50%
AUDJPY 62% 51% 19% -30% 44% 5% -54% -71% 34% 25% 60% 57% 52%
USDJPY -3% -26% -3% 32% -45% 0% 14% 18% -12% -63% -11% -42% -29% 13%
Rates
Tsy 10Y 13% 20% 1% -38% 10% 21% -27% -13% 21% -3% 53% 3% 29% 41% 23%
Tsy 30Y 17% 24% -2% -46% 17% 20% -28% -18% 23% 9% 57% 11% 35% 47% 11% 97%
Source: CS Derivatives Strategy; correlations greater than 75% highlighted in red
5
Cross-Asset Correlation Analysis

Weekly Change in Asset Correlations (1M) Cross-Asset Correlation Range (1Y)
20% 100%
80%
15%
Change in Correlation (ppts)
60%
10% 40%
20%
5%
0%
0% -20%
-40%
-5%
-60%
-10% -80%
-100%
-15% vs. Gold vs. Credit vs. Treasury vs. Oil vs. EUR
vs. Gold vs. Credit vs. Treasury vs. Oil vs. EUR
Source: CS Derivatives Strategy Source: CS Derivatives Strategy ♦ Last Close Value
Historical Asset Correlations

SPX vs. Gold (1M) SPX vs. 10Y Treasury Yield (1M) SPX vs. High Yield Credit (1M) SPX vs. Oil (1M)
80% 100% -100% 100%
-90%
60%
75% 75%
-80%
40%
-70%
50% 50%
20%
-60%
0% 25% -50% 25%
-20% -40%
0% 0%
-30%
-40%
-20%
-25% -25%
-60%
-10%
-80% -50% 0% -50%
Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Jan-20 Apr-20 Jul-20
Source: CS Derivatives Strategy
Cross-Asset Volatility Contagion Analysis

Weekly Change in Volatility Contagion (1M) Cross-Asset Volatility Contagion Range (1Y)
2% 100%
0% 90%
Change in Vol Contagion (ppts)
80%
-2%
70%
-4% 60%
-6% 50%
40%
-8%
30%
-10%
20%
-12% 10%
-14% 0%
vs. EUR vs. Credit vs. Treasury vs. Oil vs. Gold vs. EUR vs. Credit vs. Treasury vs. Oil vs. Gold
Source: CS Derivatives Strategy Source: CS Derivatives Strategy ♦ Last Close Value
Historical Cross-Asset Volatility Spillover

SPX vs. Gold (1M) SPX vs. 10Y Treasury Yield (1M) SPX vs. High Yield Credit (1M) SPX vs. Oil (1M)
100% 100% 100% 100%
90% 90% 90% 90%
80% 80% 80% 80%
70% 70% 70% 70%
60% 60% 60% 60%

50% 50% 50% 50%
40% 40% 40% 40%
30% 30% 30% 30%
20% 20% 20% 20%
10% 10% 10% 10%
0% 0% 0% 0%
Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-19 Jan-20 Apr-20 Jul-20
Source: CS Derivatives Strategy; please refer to page 5 on how we define and measure volatility spillover
6
Equity Volatility & Correlation
7
Global Index Volatility Snapshot

Equity Volatility Snapshot 1M Implied Volatility Range (1Y)
S&P 500 Euro Stoxx 50
90%
Volatility 1-Week Percentile Volatility 1-Week Percentile
Levels Change (1Y) Levels Change (1Y) 80%
Short-Dated Volatility
70%
1M Implied 21.7% 0.6% 58% 24.1% 4.6% 64%
1M Realized 23.9% 2.0% 66% 19.5% 2.0% 53% 60%
1M Imp-Rlz Spread -2.2% -1.4% 24% 4.6% 2.5% 89% 50%
Long-Dated Volatility
40%
1Y Implied 24.5% 0.6% 72% 21.8% 1.4% 71%
3Y Implied 22.4% 0.2% 81% 18.9% 0.5% 68% 30%
Skew & Term Structure 20%
3M Skew (90-110%) 11.5% 0.5% 42% 10.5% 0.0% 42%
7.2% 0.0% 17% 6.2% 0.1% 53% 10%
1Y Skew (90-110%)
1Y-1M Term Structure 2.8% 0.0% 57% -2.3% -3.1% 41% 0%
3Y-1Y Term Structure -2.1% -0.4% 34% -2.9% -0.9% 30% SPX RTY NDX SX5E DAX UKX NKY KOSPI2 HSI
Implied vs Realized Volatility Weekly Change in Equity Index Vol

45% 7
40% NDX 6
Wkly Chg in 1M ATM Vol (Pts)

35% Cheap
1M Realized Volatility
5
30%
SPX RTY 4
25%
DAX
UKX 3
20%
KOSPI2 SX5E
15% 2
NKY HSI
10% Rich 1
5%
5% 10% 15% 20% 25% 30% 35% 40% 45% 0
1M Implied Volatility RTY DAX SX5E UKX KOSPI2 HSI
Equity Index Volatility Time Series

Index Volatility (3M ATM) Index Skew (3M 90-110%)
70% 18%
60% 16%
14%
50%
12%
Skew (Spread)
Volatility
40% 10%
30% 8%
6%
20%
4%
10%
2%
0% 0%
Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20
SPX 3M Imp Vol SX5E 3M Imp Vol NKY 3M Imp Vol SPX 3M Skew SX5E 3M Skew NKY 3M Skew
Index Term Structure (2Y-3M) Index Relative Vol Heat Map

10%
5%
0%
-5%
Term Structure
-10%
-15%
-20%
-25%
-30%
-35%
-40%
Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20
SPX TermStr SX5E TermStr NKY TermStr
8
S&P 500 Index Volatility Surface

3M Implied & Realized Volatility SPX 1M, 6M, 2Y Implied Volatilities
70% 80%
60% 70%
50% 60%
50%
Volatility
Volatility
40%
40%
30%
30%
20%
20%
10% 10%
0% 0%
SPX 3M Imp Vol SPX 3M Realized Vol SPX 1M Imp Vol SPX 6M Imp Vol SPX 2Y Imp Vol
SPX 3M Skew SPX Term Structure

90% Skew Range (1Y) Current Skew Skew (1W Ago) 80% Term Str Range (1Y) Current Term Str Term Str (1W Ago)
80%
70%
70%
60%
60%
50%
Volatility
50%
Volatility
40%
40%
30%
30%
20% 20%
10% 10%
0% 0%
50 60 70 80 90 ATM 110 120 130 140 150 1M 2M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y
Strike Strike
Euro Stoxx 50 Volatility Surface

SX5E 3M Implied & Realized Volatility SX5E 1M, 6M, 2Y Implied Volatilities
70% 80%
60% 70%
60%
50%
50%
Volatility
Volatility
40%
40%
30%
30%
20%
20%
10% 10%
0% 0%
SX5E 3M Imp Vol SX5E 3M Realized Vol SX5E 1M Imp Vol SX5E 6M Imp Vol SX5E 2Y Imp Vol
SX5E Skew (3M) SX5E Term Structure

100% Skew Range (1Y) Current Skew Skew (1W Ago) 80% Term Str Range (1Y) Current Term Str Term Str (1W Ago)
90% 70%
80%
60%
70%
50%
60%
Volatility
Volatility
50% 40%
40% 30%
30%
20%
20%
10% 10%
0% 0%
50 60 70 80 90 ATM 110 120 130 140 150 1M 2M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y
Strike Strike
9
VIX and VSTOXX
VIX Futures Curve V2X Futures Curve

Oct Nov Dec Jan Feb Mar Apr May Oct Nov Dec Jan Feb Mar Apr May
34 Nov 2.5 34 3.0
Dec
Oct
32 2.0 32 2.5
Jan
Feb
2.0
Mar
30 1.5 30
Apr
Nov
May
Oct
1.5
Dec
Jan
28 1.0 28
Feb
1.0
Mar
Apr
May
26 0.5 26 0.5
24 0.0 24 0.0
1m 2m 3m 4m 5m 6m 7m 8m 1m 2m 3m 4m 5m 6m 7m 8m
VIX futs curve 1W change (rhs) 1M ago 1W ago Latest V2X futs curve 1W change (rhs) 1M ago 1W ago Latest
VIX vs SPX Beta V2X vs SX5E Beta

15 Last 2y 15 Last 2y
21-Sep
10 10
V2X daily change

21-Sep
23-Sep
VIX daily change
24-Sep
5
24-Sep
25-Sep
23-Sep
y = -131.49x + 0.08
22-Sep
22-Sep
25-Sep
R² = 0.65
0 0
-5 -5
y = -126.84x + 0.02
R² = 0.67
-10 -10
-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5%
SPX daily return SX5E daily return
VIX Implied vs Realised Vol (of vol) V2X Implied vs Realised Vol (of vol)
250 250
200 200
150 150
100 100
50 50
0 0
Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20
VVIX VIX 1M realised (walk) vol V-VSTOXX V2X 1M realised (walk) vol
VIX vs SPX Volatility Ratio V2X vs SX5E Volatility ratio

10
10
9
9
8
8
7
7
6 6
5 5
4 4
3 3
2 2
1 1
VVIX/VIX ratio VIX/SPX 1M realised vol ratio V-VSTOXX/V2X ratio V2X/SX5E 1M realised vol ratio
10
Dividend Monitor
Global Dividend Futures SX5E Dividend Futures Change
110 1%
0%
100 -1%
90 -2%
-3%
80 -4%
2020
2022
2023
2021
2024
2025
2026
-5%
2027
2028
2029
70 -6%
60 -7%
-8%
50 -9%
-10%
40
-11%
1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
SX5E SPX UKX NKY
1W change Move attributed to SX5E beta
Source: CS Derivatives Strategy; futures curve rescaled by setting 2019 dividends to 100 Source: CS Derivatives Strategy
SX5E Dividend Bottom-up SX5E Dividend Yield

180
159
5.5%
147
160
5.0%
126
124
122
122
108.0
140
118
117
116
116
115
114
113
110
4.5%
98.0
120
99
83.4
100 4.0%
80 3.5%
83.6
81.4
81.3
80.2
79.5
60
77.9
76.6
3.0%
75.0
73.4
72.1
40
2.5%
20
2.0%
0
1.5%
2005
2008
2012
2015
2019
2022
2025
2029
2006
2007
2009
2010
2011
2013
2014
2016
2017
2018
2020
2021
2023
2024
2026
2027
2028
'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Realised Futures Bottom-up (bloomberg) SX5E 1y div yield SX5E 3y div yield SX5E 5y div yield
Intra-index correlations
SPX Implied and Realised Correlation SX5E Implied and Realised Correlation
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
SPX 1M implied correlation (top 50) SPX 1M realised correlation (top 50) SX5E 1M implied correlation SX5E 1M realised correlation
Variance Convexity
Variance Convexity Ratio Variance Convexity Spread
1.50 14%
1.45 12%
1.40
1.35 10%
1.30 8%
1.25
6%
1.20
1.15 4%
1.10
2%
1.05
1.00 0%
SPX 1M var/vol ratio SX5E 1M var/vol ratio SPX 1M var-vol spread SX5E 1M var-vol spread
11
Macro/Equity ETF Volatility

Implied vs. Realized Volatility 1M Implied Volatility Range (1Y)
50 250
45
40 USO EWZ 200
Cheap QQQ
1M Realized Volatility
35
30 150
SPY IWM
25
20 EEM 100
EFA
15
10 GLD Rich
TLT 50
5 HYG
0
0
0 10 20 30 40 50
SPY IWM QQQ EEM EWZ EFA USO GLD HYG TLT
1M Implied Volatility
Macro ETFs (Biggest Weekly Vol Movers) Sector ETFs (Biggest Weekly Vol Movers)
7 9
8
6

5
6
4 5
3 4
3
2
2
1 1
0 0
SLV HEDJ IWM FXI EEM XOP XLE XLF IYR XLY XRT
Equity ETF Volatility

Equity ETF Volatility (3M ATM) Equity ETF Skew (3M 90-110%)
80% 18%
70% 16%
14%
60%
12%
Skew (Spread)
50%
Volatility
10%
40%
8%
30%
6%
20% 4%
10% 2%
0% 0%
QQQ 3M Imp Vol IWM 3M Imp Vol EEM 3M Imp Vol QQQ 3M Skew IWM 3M Skew EEM 3M Skew
Equity ETF Term Structure (2Y-3M) Relative Vol Spreads (vs. SPX)
15% 15%
10%
5% 10%
0%
Implied Vol Spread
Term Structure
-5% 5%
-10%
-15%
0%
-20%
-25%
-30% -5%
-35%
-40% -10%
QQQ TermStr IWM TermStr EEM TermStr QQQ-SPX 3M Vol Spd IWM-SPX 3M Vol Spd EEM-SPX 3M Vol Spd
12
Intra-Sector Equity Correlations

Implied & Realized Correlation Snapshot Weekly Change in Realized Correlation (1M)
Implied Percentile Realized Percentile Imp-Rlz Percentile
Sector 16%
Corr (1M) (1Y) Corr (1M) (1Y) Spread (1Y)
14%
Cons Staples (XLP) 42.4% 71% 59.1% 82% -16.7% 18% 12%
Change in Correlation
Materials (XLB) 57.6% 71% 76.3% 97% -18.7% 5% 10%
Industrials (XLI) 62.1% 69% 68.6% 80% -6.5% 25% 8%
Healthcare (XLV) 48.9% 68% 50.6% 73% -1.7% 36% 6%
Technology (XLK) 69.6% 67% 63.0% 69% 6.5% 52%
4%
Utilities (XLU) 57.5% 64% 58.8% 57% -1.2% 67%
2%
Financials (XLF) 73.8% 60% 61.3% 52% 12.5% 59%
0%
Energy (XLE) 72.8% 51% 83.3% 81% -10.5% 12%
Comm Svcs (XLC) 55.5% 49% 58.0% 74% -2.5% 30%
-2%
Cons Discr (XLY) 23.3% 32% 35.9% 59% -12.6% 18% -4%
S&P 500 Index (SPX) 36.8% 49% 37.7% 51% -0.9% 37% XLE XLB XLI XLP XLF XLU XLV XLK SPX XLC XLY
Technology, Communication Services, & Financial Sector Correlations (1M)

Technology (XLK) Communication Services (XLC) Financials (XLF)
100% 100% 100%
Implied Correlation (1M)
Realized Correlation (1M)
80% 80% 80%
60% 60% 60%
40% 40% 40%
20% 20% 20%

Implied Correlation (1M) Implied Correlation (1M)
Realized Correlation (1M) Realized Correlation (1M)
0% 0% 0%
Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-19 Jan-20 Apr-20 Jul-20
Consumer Staples, Discretionary, & Healthcare Sector Correlations (1M)

Consumer Staples (XLP) Consumer Discretionary (XLY) Healthcare (XLV)
100% 100% Implied Correlation (1M) 100%
80% 80% 80% Realized Correlation (1M)
60% 60% 60%
40% 40% 40%
20% 20% 20%
0% 0% 0%
Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Jan-20 Apr-20 Jul-20
Materials, Industrials, & Energy Sector Correlations (1M)

Materials (XLB) Industrials (XLI) Energy (XLE)
100% 100% 100%
Implied Correlation (1M) Realized Correlation (1M)
80% 80% 80%
60% 60% 60%
40% 40% 40%
20% 20% 20% Implied Correlation (1M)

0% 0% 0%
Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Jan-20 Apr-20 Jul-20 Oct-19 Jan-20 Apr-20 Jul-20
13
Commodity Volatility
14
Commodity Overview - Oil

Oil Volatility Snapshot WTI Futures Curve
WTI Volatility (Commodity) USO Volatility (Equity) $46.0
Weekly Percentile Weekly Percentile
Latest Latest $45.0
Chg (1Y) Chg (1Y)
$44.0
1M Implied 36.9% 47% 35.6% 43% $43.0
1M Realized 47.7% 60% 39.5% 60% $42.0
1M Imp-Rlz Spd -10.8% 25% -3.9% 26% $41.0
$40.0
6M Implied 40.9% 59% 39.5% 54%
$39.0
6M Realized 134.8% 57% 70.7% 50%
6M Imp-Rlz Spd -93.9% 39% -31.1% 39% $38.0
$37.0
1M Skew 9.4% 62% 8.1% 62% $36.0
6M-1M Trm Str 4.0% 91% 4.0% 85% NOV 20 FEB 21 MAY 21 AUG 21 DEC 21 MAR 22 JUN 22 SEP 22
Latest (Sep-25) A Week Ago (Sep-18)
WTI Volatility (Commodity) USO Volatility (Equity)

WTI Implied vs. Realized Vol USO Implied vs. Realized Vol
600 300
500 250
400 200
Volatility (%)
Volatility (%)
300 150
200 100
100 50
0 0
Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20
1M Implied 1M Realized 1M Implied 1M Realized
WTI Skew (Front Month) USO Skew (1M)

250 90
Front Month Skew (25-Delta) 1M Skew (25-Delta)
80
200 70
60
150
50
Skew (%)
Skew (%)
40
100
30
20
50
10
0 0
Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20
-10
-50 -20
WTI Volatility Term Structure USO Volatility Term Structure

46 46
44 44
42 42
Volatility (%)
40 40
Volatility (%)
38 38
36 36
34 34
32 32
30 30
1M 2M 3M 6M 1Y 1M 2M 3M 6M 1Y
Latest (Sep-25) A Week Ago (Sep-18) Latest (Sep-25) A Week Ago (Sep-18)
15
Commodity Overview - Gold

Gold Volatility Snapshot Comex Gold Futures Curve
Gold Volatility (Commodity) GLD Volatility (Equity) $2,100
Weekly Percentile Weekly Percentile
Latest Latest $2,050
Chg (1Y) Chg (1Y)
$2,000
1M Implied 17.9% 57% 18.2% 63%
1M Realized 15.7% 55% 13.5% 47% $1,950
1M Imp-Rlz Spd 2.2% 78% 4.7% 86%
$1,900
6M Implied 20.1% 59% 19.9% 62%
6M Realized 19.4% 49% 18.4% 50% $1,850
6M Imp-Rlz Spd 0.7% 75% 1.5% 75%
$1,800
1M Skew -2.0% 29% 0.1% 98% $1,750

6M-1M Trm Str 2.2% 77% 1.7% 72% OCT 20 APR 21 OCT 21 APR 22 JUN 23 DEC 24 JUN 26
Latest (Sep-25) A Week Ago (Sep-18)
Comex Gold Volatility (Commodity) GLD Volatility (Equity)

Gold Implied vs. Realized Vol GLD Implied vs. Realized Vol
60 50
50 40
40
Volatility (%)
Volatility (%)
30
30
20
20
10
10
0 0
Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20
1M Implied 1M Realized 1M Implied 1M Realized
Gold Skew (Front Month) GLD Skew (1M)

30 8
Front Month Skew (25-Delta)
6 1M Skew (25-Delta)
25
4
20
2
15 0
Skew (%)
-2
Skew (%)
10
-4
5 -6
0 -8
-10
-5
-12
-10 -14
Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20
Gold Volatility Term Structure GLD Volatility Term Structure

24 24
23 23
22 22
21 21
Volatility (%)
Volatility (%)
20 20
19 19
18 18
17 17
16 16
15 15
14 14
1M 2M 3M 6M 1Y 2Y 1M 2M 3M 6M 1Y
Latest (Sep-25) A Week Ago (Sep-18) Latest (Sep-25) A Week Ago (Sep-18)
16
Interest Rate Volatility
17
Interest Rate Monitor

Fed Fund Futures Eurodollar Curve
0.1 0.9
1-Week Ago Current 0.8
0.08
0.7
0.06 0.6
Yield (%)
Yield (%)
0.5
0.04
0.4
0.02 0.3
0.2
0
0.1
-0.02 0
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Dec'20 Sep'21 Jun'22 Mar'23 Dec'23 Sep'24 Jun'25
Current 1-Week Ago
Fed Fund Futures (Next 12M)
US Treasury Yield Curve Inflation Monitor

1.6 0
2.4 2.2
1.4 2
-1 2.2
1.2 1.8
-2 2 1.6
Change (bps)
1
Yield (%)
1.4
1.8
Rate (%)
0.8 -3
1.2
0.6 1.6
-4 1
0.4 0.8
1.4
-5
0.2 US 5Y5Y Forward Inflation 0.6
1.2
0 -6 0.4
US 5Y Inflation Swap (Right)
2Y 3Y 5Y 7Y 10Y 30Y 1 0.2
Change (Right Axis) Current Yield 1-Week Ago Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20
Swaption Implied Volatility

USD Swaption Implied Volatility Surface Weekly Change in Implied Vol
1
0.8
0.6
0.4
Normals
0.2
-0.2
-0.4
-0.6
1Mx2Y 1Mx5Y 1Mx10Y 1Yx2Y 1Yx5Y 1Yx10Y
Gamma Vega
Skew & Term Structure

30
10Y Treasury Skew (Put-Call) 220 10Y Tail Volatility Term Structure
20
200 1-Year Range Current 1-Week Ago
10
180
0
Volatility (Normals)
160
bp/annual
-10
140
-20
120
-30 100
-40 80
-50 60
TY 2M 5-Strk Skew (Put-Call)
-60 40
Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y
Source: CS Derivatives Strategy TY: 1-Strike=$0.50 Source: CS Derivatives Strategy
18
Foreign Exchange (FX) Volatility
19
Foreign Exchange (FX) Monitor

Foreign Exchange (FX) Snapshot Weekly Change in Spot (USD Base)
Spot YTD Chg 1M Imp Vol Percentile 1M Skew** Percentile 2.0%
Majors
EUR 1.1624 3.7% 6.6% 48% -0.05% 69% 1.5%
JPY 105.44 3.0% 6.1% 50% 0.96% 30%
Weekly Change (%)

GBP 1.276 -3.7% 10.5% 73% 1.85% 76% 1.0%
CHF 0.9291 4.0% 6.1% 53% 0.40% 0%

0.5%
CAD 1.3387 -3.0% 6.5% 56% -0.55% 36%
AUD 0.7046 0.4% 10.8% 68% 1.42% 69%
0.0%
NZD 0.655 -2.8% 10.5% 65% 1.22% 66%
Crosses -0.5% USD Strength
AUDJPY 74.288 2.6% 11.0% 63% 1.85% 60% USD Weakness
EURGBP 0.91092 -7.1% 8.6% 70% -1.65% 22% -1.0%
CHFJPY 113.481 -1.0% 6.2% 47% 0.43% 72% EUR JPY GBP CHF CAD AUD NZD
Source: CS Derivatives Strategy; ** Skew defined as the difference in imp vol between the 25-delta put vs. call Source: CS Derivatives Strategy
1M Implied Vol 1-Year Range Weekly Change in 1M Implied Volatility

32% 1.60
1.40
27% 1.20
Change in Vol (pts)

1.00
1M Implied Vol
22%
0.80
17% 0.60
0.40
12%
0.20
7% 0.00
-0.20
2%
-0.40
EUR JPY GBP CHF CAD AUD NZD EUR JPY GBP CHF CAD AUD NZD
Source: CS Derivatives Strategy ♦ Last Close Value Source: CS Derivatives Strategy
Implied vs. Realized Volatility

18% 28% 34%
EURUSD 1M Vol USDJPY 1M Vol AUDUSD 1M Vol
16%
1M Implied Vol 1M Realized Vol 29%
1M Implied Vol 1M Realized Vol 23% 1M Implied Vol
14%
24% 1M Realized Vol
12%
Volatility (%)
18%
10% 19%
8% 13%
14%
6%
8%
9%
4%
2% 3% 4%
Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20
Volatility Skew
10.0% 14.0%
9.4% EURUSD 1M Skew USDJPY 1M Skew AUDUSD 1M Skew
9.5%
Current Skew
8.9% Current Skew 9.0% 13.0%
Skew (1Wk Ago)
Current Skew Skew (1Wk Ago)
8.4% 1Y average 8.5% Skew (1Wk Ago) 1Y average
12.0%
8.0% 1Y average
Volatility
7.9%
7.5% 11.0%
7.4% 7.0%
6.5% 10.0%
6.9%
6.0%
9.0%
6.4% 5.5%
5.9% 5.0% 8.0%

10D Put 25D Put ATM 25D Call 10D Call 10D Put 25D Put ATM 25D Call 10D Call 10D Put 25D Put ATM 25D Call 10D Call
20
Credit Suisse Equity Derivatives (US) Credit Suisse Equity Derivatives (EMEA)
Equity Derivatives Strategy Equity Derivatives Strategy
Mandy Xu Anshul Gupta

Equity Derivatives Strategy Equity Derivatives Strategy
+1 212 325 9628 +44 208 888 8888
mandy.xu@credit-suisse.com anshul.gupta.3@credit-suisse.com
Equity Derivatives Sales Equity Derivatives Sales
Elaine Sam Luca Lodi-Rizzini

Head, Derivatives Sales Head, Derivatives Sales
+1 212 325 5072 +44 207 888 0291
elaine.sam@credit-suisse.com luca.lodirizzini@credit-suisse.com
Peter Janney David Cohen

Head, Flow Derivatives Sales Co-Head, Flow Derivatives Sales
+1 212 325 6338 +44 207 883 0091
peter.janney@credit-suisse.com david.cohen@credit-suisse.com
Mike Heraty Steven Jorgensen

Head, Institutional Derivatives Sales Co-Head, Flow Derivatives Sales
+1 212 325 8464 +44 207 883 0212
michael.heraty@credit-suisse.com steven.jorgensen@credit-suisse.com
Rose Lee
Head, Structured Products Sales & Development
+1 212 325 4128
rose.lee@credit-suisse.com
21
US Disclaimer:
This material has been prepared by individual traders or sales personnel of Credit Suisse Securities Limited and not by the Credit Suisse research department.
It is provided for informational purposes, is intended for your use only and does not constitute an invitation or offer to subscribe for or purchase any of the
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EQUITY DERIVATIVES STRATEGY

Weekly Market Commentary

Market Volatility Bulletin

Vol Percentile (1Y)

contrast, remained relatively stable at 26% (+0.6 pt wk/wk) and 40%

7.4% (+0.1 pt), respectively. Meanwhile, US rate vol continued 30%

week at 39 nms. 10%

SKEW turns positive for gold; SPX convexity lower: S&P

TERM STRUCTURE kink widens: S&P Dec vols continued to

EQUITY CORRELATIONS muted on limited contagion: S&P

Mandy Xu, CFA Anshul Gupta

underperform, SX7E stood out in particular down ~10% last -2 -1 0 1 2 3 4 5 6

PUT SKEW collapsed further, despite the sell-off in equities.

TERM STRUCTURE flattened from near 2y extremes, as

page 3 for related trade ideas).

DIVIDEND futures collapsed amid auto-call dynamics;

CORRELATION gained; The SX5E 1M implied correlation

Featured Equity Derivatives Trade Ideas

Source: CS Economics Research Source: CS Equity Derivatives Strategy

Monetise SX5E term structure inversion via FVAs/window KOs

Cross-Asset Correlation & Contagion

Cross-Asset Volatility Analysis

Asset Volatilities (1M Realized)

Source: CS Derivatives Strategy Source: CS Derivatives Strategy

Cross Asset Volatility Contagion Snapshot

Cross Asset Correlation Snapshot (1M)

Equities Corporate Credit Commodities Foreign Exchange Rates

SX5E 37% 49%

LUCI US -42% -53% -45% -4% -40% -16%

CDX HY -70% -68% -40% 15% -76% -4% 62%

Source: CS Derivatives Strategy; correlations greater than 75% highlighted in red

Cross-Asset Correlation Analysis

Historical Asset Correlations

0% 25% -50% 25%

Source: CS Derivatives Strategy

Cross-Asset Volatility Contagion Analysis

Historical Cross-Asset Volatility Spillover

90% 90% 90% 90%

80% 80% 80% 80%

70% 70% 70% 70%

60% 60% 60% 60%

Equity Volatility & Correlation

Global Index Volatility Snapshot

Source: CS Derivatives Strategy Source: CS Derivatives Strategy

Implied vs Realized Volatility Weekly Change in Equity Index Vol

Wkly Chg in 1M ATM Vol (Pts)

Source: CS Derivatives Strategy Source: CS Derivatives Strategy

Equity Index Volatility Time Series

Index Term Structure (2Y-3M) Index Relative Vol Heat Map

S&P 500 Index Volatility Surface

SPX 3M Skew SPX Term Structure

Euro Stoxx 50 Volatility Surface

SX5E Skew (3M) SX5E Term Structure

VIX and VSTOXX

VIX Futures Curve V2X Futures Curve

Source: CS Derivatives Strategy Source: CS Derivatives Strategy

VIX vs SPX Beta V2X vs SX5E Beta

V2X daily change

Source: CS Derivatives Strategy Source: CS Derivatives Strategy