EFTA02665816

From: Ens, Amanda Sent: Wednesday, December 28, 2016 4:39 PM To: Jeffrey E.; Richard Kahn Subject: Energy We continue to like owning upside in the E&Ps. We think Saudi and other Gulf Cooperation Council members will likely reduce crude output as stated, while Russia and others are likely to either freeze it or reduce it only modestly. We also project EM demand growth next year of 1.2mn b/d led by China and India, and see a modest demand contraction in OECD economies. On these assumptions, Brent should average $61/bbl in 2017 and hit $70/bbl at the peak of the US driving season. We've discussed Hess in the past which is still a high conviction pick but it's already moved a lot in relation to the sector. XOP — the Oil & Gas E&P ETF — is an easy way to express the view with more diversification. Flat call skew (20th percentile historically) makes the "appearing" call spread, similar to what we traded for financials, look attractive. * Buy a 6 month XOP 110% call with a short 117.5% call that knock in if XOP trades above 125% during the life of the trade for 2.45% premium cost o Gross max payoff if knock-in is triggered: 3.1x (7.5%/2.45%) o Gross max payoff if knock-in is not triggered: 6.1x (14.9%/2.45%) — you have upside up to 124.9% Regards, Amanda Amanda Ens Director Global Equities Bank of America Merrill Lynch Merrill Lynch, Pierce, Fenner & Smith Incorporated One Bryant Park I 5th Floor I New York, NY 10036 Phone: Mobile EFTA_R1_01916498 EFTA02665816 This message, and any attachments, is for the intended recipient(s) only, may contain information that is privileged, confidential and/or proprietary and subject to important terms and conditions available at http://www.bankofamerica.com/emaildisclaimer. If you are not the intended recipient, please delete this message. 2 EFTA_R1_01916499 EFTA02665817