Global Equity Volatility Insights Why S&P vol dispersion may be the best way to trade a bubble in Tech we estimate 68% of the 06 June 2017 Unauthorized redistribution of this report is prohibited. This report is intended for [email protected] US How to detect and position for a potential Tech Bubble Our investment strategists recently warned against the risk of an overshoot in US Tech, as data on valuations, relative performance, and inflows invoke echoes of the late ‘90s. However, rising Tech vol alongside rising Tech stock prices – a classic sign of an asset bubble – has yet to materialize, suggesting still early stages of bubble formation. Derivatives can be a key tool for trading bubbles, allowing investors to capture asset price upside while mitigating reversal risk. To this end, we like stock replacing FANG positions or overlaying Tech exposure with Nasdaq 100 (NDX) put spreads. Long volatility dispersion strategies are particularly well-suited for trading asset bubbles, in our view, as they can profit from both the inflation and deflation of a bubble without needing to time the top. Specifically, we like SPX 12M Top50 dispersion to position for a potential Tech Bubble as (i) the Top50 basket is dominated by Tech stocks, hence would benefit from any rise in their vol from currently low levels; (ii) the trade would benefit from any downward pressure on broad-market correlations as Tech stocks decouple from other large caps; and (iii) the late ‘90s Tech Bubble generated the most sustained period of elevated S&P vol dispersion in history. Europe DTE Sep17 collars can hedge DTE-TMUS merger risk; value in Enel bullish riskies DTE GY has run too fast, too quick: investors who own stock should consider hedging a pullback using a Sep17 collar (+17put/-18 call for 46bps) to hedge losses greater than 2.9% while retaining upside to 18 (stock’s ~15yr high is 18.05). Extending our EU equity vs credit theme to single names, we find Enel 3m bullish risk reversals screen a