- Weak seasonality for equities in September likely to be front run like last year
- UBS highest Beta (1.09) to SPY among European banks (Av 0.74)
- Spot trading at 2Y range highs and cheap volatility justify adding negative delta
Moving into the weak September seasonality for risk assets we believe the market will likely front run the move which tends to materialise in the second half of the month. This occurred last year with the SPY posting a c.4.5% sell off in the first week of September. The PCE print today and US Payrolls next Friday (5th September) could serve as catalysts.
UBS has the highest Beta (1.09) to US stocks amongst European banks (Avg 0.74). With spot currently at range highs we note several c.10% peak-to-trough swings over the last few years. Looking at last year’s seasonality the stock posted a c.9.5% sell-off vs 4.5% for the SPY. UBS has also lagged weakness in the SX7P (1W -5%). With 2M volatility cheap at a 2YPc5 we propose Long Oct 25 30 Puts costing 1% of underlying (Spot: 32.29. Fut: 32.31).