EFTA02501299.pdf

From: jeffrey E. <jeevacation@gmail.com> Sent: Wednesday, June 3, 2015 2:02 PM To: Daniel Sabba Subject: Re: Idea for US equity hedging... [C] too complex for me On Wed, Jun 3, 2015 at 9:42 AM, Daniel Sabba < Classification: Confidential Jeffrey,</=pan> > wrote: We wanted to share this =5 equity hedging idea with you. We think it is relevant since US equity in=ices are near historic highs, implied volatility in US equities is close t= historical lows and there is potential for Fed liftoff in September. David Bianco published t=e following on 5/22 (full report attached) about the possibility of a 5%+ =ullback in the summer months: "We believe the probability of a 5%+ dip is high this summer =nd our tactical call remains Down given the S&P now at an even higher =E than a year ago, heightened uncertainty in 10yr yields, weak earnings growth and continued soft economic data. We haven =80 t had a 5%+ dip this year. Historically 5%+ dips are common and happe= at least once a year since 1960, except 1964, 1993 & 1995. It has bee= 916 trading days (3.6 years) since a 10% correction. Selloff triggers could be a further rise in 10yr yields especially if UE k=eps falling amidst slow economic growth and Fed remains unclear on first h=ke timing, or a jump in the dollar upon the Fed expressing firm intentions=to hike in Sept." With that said, we looke= at OTC equity put spreads contingent on higher rates. We priced in-the-money versions which would obtain its maximum payout (=ver 5x premium) with a 5% sell-off in SPX and higher 10y US swap rates (CM=, 25bps over its forward level). Indicative transaction terms (as of 06/03/2015): Client buys: =AO OTC SPX 105%/95% Put Spread contingent o= l0y USD CMS > atmf+25bps at expiry Notional: =C2 =AO USD50mm EFTA_R1_01628736 EFTA02501299 Expiry: =AO =C2 18 Dec 2015 Offer (mid): =AO =C2 =A0 2.00% (1.60%) Ref vanilla: =AO =C2 4.30% Ref SPX future: =C2 2115 Ref 10y fwd: =A0 2.54% SPX Implied volatility levels close to historica= lows Please =et us know if you would like to discuss. Best regards, Daniel<=> =C2 Daniel Sabba</=> Key Client Partners</=> Deutsche Bank Securities=Inc. Tel Mo Em All trade execution information contained herein is being provided as an ac=ommodation at your request in advance of your receipt of the official trad= confirmation(s). Additional trade detail information available upon reque=t. The terms of the trade(s) may be subject to change prior to settlement, and therefore the official trade=confirmation(s) and account statements issued by Deutsche Bank shall gover=. Deutsche Bank is not responsible for any discrepancy between the informa= execution report and the official trade confirmation(s) or account statements. This communication may contain confidential and/or privileged information. =f you are not the intended recipient (or have received this communication =n error) please notify the sender immediately and destroy this 2 EFTA_R1_01628737 EFTA02501300 communicati=n. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidde=. Deutsche Bank does not render legal or tax advice, and the information cont=ined in this communication should not be regarded as such. please =ote The information contained in this communication is confiden=ial, may be attorney-client privileged, may constitute inside informati=n, and is intended only for the use of the addressee. It is the propert= of JEE Unauthorized use, disclosure or copying of this communica=ion or any part thereof is strictly prohibited and may be unlawful. If =ou have received this communication in error, please notify us immediat=ly by return e-mail or by e-mail to jeevacation@gmail.com <mailto:jeevacation@gmail=com> , and destroy this comm=nication and all copies thereof, including all attachments. copyright -=11 rights reserved 3 EFTA_R1_01628738 EFTA02501301