Equity Vol Insights Vol collapses but are stocks less risky

Global Equity Volatility Insights Vol collapses but are stocks less risky?

Stock vols collapse, but is the world more certain? 18 August 2026

After approaching multi-decade highs, US single stock vol has declined sharply and drove Equity Derivatives the VIX to its year-to-date low of 14.25 last Friday. While August’s seasonal weakness Global and the passing by of major earnings prints have been dampeners for single stock vol, we also see the vol crush being driven by (i) the recent easing of bubble-like dynamics and FOMO in the semis space, and (ii) de-leveraging in the single stock ecosystem. Indeed, the biggest stock vol declines were seen in semis stocks that sharply pulled back after extreme BRI readings (e.g., MU, INTC). Given how unprecedented the recent stock vol crush has been, along with the seasonal support, key macro catalysts, and the broader risk of a return to spot-up, vol-up dynamics in the AI space, we see the risk for Global Equity Derivatives Rsch BofAS stock vol (and by extension, index vol) to move higher from here, in our view making it a Arjun Goyal good time to own vol going into a potentially stormy fall. Equity-Linked Analyst BofAS EU rally stretched? Limited upside & downside via RV Vittoria Volta >> Equity-Linked Analyst European equities have staged a strong recovery from their March lows, helped by BofASE (France) resilient earnings and relatively light positioning. The rally has flattened call skew, Nitin Saksena compressed front-end volatility and steepened the vol curve, while positioning has Equity-Linked Analyst BofAS largely recovered to near pre-war levels. Looking ahead, a number of potential catalysts Meriem Hafid >> (central bank meetings, US midterms, unresolved geopolitical tensions, AI-related risks Research Analyst etc.) could temper further upside in Europe. Against this backdrop, we maintain a BofASE (France)

cautious stance by favouring (i) limited upside call spreads that benefit from flat call Abhinandan Deb >> Equity-Linked Analyst skew, and/or (ii) funding SX5E protection by selling SX6P puts that are near record rich MLI (UK) levels to SX5E puts. EU Utilities have already borne much of the pain from higher Benjamin Bowler inflation expectations and rates, leaving limited scope for further relative Equity-Linked Analyst BofAS underperformance, in our view. Nicholas Dunne 72% discount to vanilla: Nikkei upside on a stronger yen Equity-Linked Analyst BofAS The market still assumes a stronger yen is bad for Japanese equities, but recent price Lars Naeckter >> action suggests otherwise. The Nikkei shrugged off the late-July intervention-led yen Equity-Linked Analyst rally, while realised USD/JPY-Nikkei correlations have fallen and recently turned negative. Merrill Lynch (DIFC)

At the same time, BofA expects two additional BoJ hikes in 2026 and sees USD/JPY See Team Page for List of Analysts

falling to 149 by year-end. We use this disconnect to recommend leveraged Nikkei upside at a 72% discount to vanilla calls in a scenario that we believe options markets Exhibit 1: 3M volatility (2weeks chg) continue to misprice. Level & changes (in parentheses) in vol pts Implied Realized Also in the GEVI S&P ) Global cross-asset stress fell as commodities stress declined ESTX ) FTSE ) High BRI readings in US cloud computing & cybersecurity DAX ) NKY ) HSCEI ) KOSPI ) Trading ideas and investment strategies discussed herein may give rise to significant risk and are EEM US ) not suitable for all investors. Investors should have experience in relevant markets and the financial XIN9I ) resources to absorb any losses arising from applying these ideas or strategies. Source: BofA Global Research >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst BofA GLOBAL RESEARCH under the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take See list of acronyms at the end of the report responsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a…