EFTA02447778

From: Richard Kahn < Sent: Friday, October 14, 2016 2:52 PM To: jeffrey E. Subject: Fwd: Russia still waiting on feedback from vahe and paul barrett.. Richard Kahn HBRK Associates Inc. 575 Lexington =venue 4th Floor New York, NY 10022 tel fax 646-350-0954 cell Begin forwarded message: From: =/b>"Ens, Amanda" Subject: =/b>Russia Date: =/b>0ctober 14, 2016 at 10:48:29 AM =DT To: =/b>Richard Kahn ‹ > Rich, For a bearish Russia =iew in the medium term (without having an ISDA), you could buy puts on =SX — VanEck Vectors Russia ETF. Russian equities are highly =orrelated to RUB (chart below). Buy a RSX vanilla put • RSX 19-May 2017 expiry ATM strike =osts about —12.4% premium Buy a RSX put spread =o:p class=""> EFTA_R1_01544920 EFTA02447778 * RSX 19-May-2017 18x12 put spread (97% = 65% strikes) costs - $1.60 or 8.9% on the 18-strike leg (3.75x max =ross payoff). You're not saving that much by spreading it, so I =refer the vanilla. We looked at pricing contingent options but liquidity is poor. If there is another market that you're also =earish, we could look to cheapen the premium with a best-of-put (eg. Best-of-put on Russia and China). =igitals and contingent options didn't price well due to =iquidity. While optionality =sn't cheap, the trade looks interesting as this is not yet a =onsensus view. Our strategists and much of the Street is =onstructive RUB given a hawkish central bank, decent carry and stronger =il. Russia's central bank governor reiterated that monetary policy should be focused on =aintaining positive real rates, with equilibrium she says around 2.5-3% =n the longer term. Before achieving 4% inflation target, she says real =ates will be kept higher. Reads as hawkish and supportive for RUB in the short term, as positive real rates should support =apital flows. RUB vs MICEX =Russian equity index) Russia is —4% of EM ETFs VWO and EEM More EM =nflows: A large creation in Vanguard FTSE EM ETF (VWO) Source: Bloomberg Amanda Ens Director Bank of America Merrill =ynch Merrill Lynch, =ierce, Fenner & Smith Incorporated One Bryant Park, 5th Floor, New York, NY 10036 Phone: =obile 2 EFTA_R1_01544921 EFTA02447779 The power =f global connectionsTM This message, and any attachments, is for the intended =ecipient(s) only, may contain information that is privileged, =onfidential and/or proprietary and subject to important terms and =onditions available at http://www.bankofamerica.com/emaildisclaimer. If you =re not the intended recipient, please delete this message. 3 EFTA_R1_01544922 EFTA02447780