Text extracted via OCR from the original document. May contain errors from the scanning process.
Cc:
Paul Morris
Kitidis
Inline-Images: unnamed; unnamed(1); unnamed(2)
>,
, Caroline
Classification: Confidential
Good Morning Jeffrey-
As you know, news out of Iran over the weekend has implications on global crude markets. Not sure if your views have
changed since our meeting, but DB analysts held a conference call yesterday on the back of the story to reiterate their view
that global crude surpluses will continue to grow, driving down prices + leading to capacity consolidation into 2015.
I know that Tazia priced up the below trades to reflect your personal views in early November - happy to refresh if you care.
Just FYI, DB Markets' Brent (bbl) forecasts are as follows:
O4 2013 - 110.00
Q1 2014 - 110.00
O3 2014 - 105.00
Currently -111.35
My contact information is below in case you have questions.
Thank you,
Vahe
Vahe Stepanian
Associate I Wealth Investment Coverage
Deutsche Bank Securities Inc.
Deutsche Asset 8 Wealth Management
345 Park Avenue - 26th Floor
New Yi
Tel.
Fax +
Mobil
Email
---- Original Message --
To:
eevacatione mail-corn
Cc:
; Paul Morris; Caroline Kitidis; Vahe Stepanian
Classification: Confidential
Jeffrey -
Below please find solutions that can be combined to reflect your view that transport/supply constraints will cause Brent to
spike within the next 5-6months for a brief (-2 week) period; your objective is to monetize both the potential upside spike and
EFTA01132342
downward reversion.
We know you've traded risk-reversals and knock-in options in the past. The knock-in puts are compelling to reflect your
reversion view. Examples below include three iterations of 6mo knock-in puts on the June 2014 contract (currently trades
—1.9% below spot). Implied vol is near 10yr lows.
Consider a risk reversal combined with a KI put. Consider overlaying these on an absolute return note given attractive curve
and vol entry point.
Please find indicative levels below. Will call you to discuss further.
Best Regards,
Tazia
Knock-In Put Iterations:
Indicative levels only, subject to market movement. Source: DB Commodities Structuring, as of
11/4/13.
Brent Jun14 reference: $104.2
Brent spot: $106.5
(1) 6mo KI Put
Put on Jun14 Brent, strike 115. Option knocks in only if Brent Jun14 closes above 115 on any day.
Indicative Offer:
-$1.96/bbl (-1.9%)
Indicative cost on $5mm notional:
$95,000
Max Loss:
Premium Paid
(2) 6mo KI Digital Put
Digital Put on Jun14 Brent, strike 115. Option knocks in only if Brent Jun14 closes above 120 on any
day.
Indicative Offer:
11.9%
Digital Payout:
100%
Indicative cost on $1mm notional:
$119,000
Max Payout on $1mm notional:
$1,000,000 (-8.4x premium paid)
Max Loss:
Premium Paid
(3) 6mo Max Strike Put
If Brent Jun14 fixes above $115/bbl on any day during trade, then: max [ 0, Maximum Brent Jun14 fix
during trade — Brent Jun14 at expiry — $10/bbl]
Indicative Offer:
—$1.51/bbl (-1.5%)
Indicative cost on $5mm notional:
$75,000
Max Payout:
Max Brent Jun14 fix during trade — Brent Jun14 at expiry —
$10/bbl
Max Loss:
Premium Paid
Upside Exposure Solutions:
Indicative levels only, subject to market movement. Source: DB Commodities Structuring, and DB
AWM Structured Solutions, as of 11/4/13.
Brent Jun14 reference: $104.2
Brent spot: $106.5
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(1) Risk Reversal:
Buy 6m $109.41 call (105% of Jun14 ref): $3.51/bbl
Sell 6m $85 put:
$0.95/bbl
Net Debit:
$2.56/bbl (-2.5%)
Indicative cost on $5mm Notional:
$125,000
Max Loss:
$87.56/bbl
For your reference:
6m $104.2 call (ATM):
$5.90/bbl (-5.7%)
6m $109.41 call (105% of Jun14 ref):
$3.51/bbl (-3.4%)
6m $85 put:
$0.95/bbl (—0.9%)
6m $90 put:
$1.58/bbl (-1.5%)
(2) ATM 6mo Swap
A futures look-alike in the form of a Jun14 ATM swap, which has positive carry of —$2/bbl (differential
between Jun14 and spot)
(3) Absolute Return Note on Brent
Structure Absolute Return Note on Brent Crude
Underlier:
Brent
Barrier Observation:
European
Maturity:
2yrs
Upside Max:
Uncapped
Barrier Level:
82.5%
Max Loss:
100%
In fully-funded form, the absolute return structure prices well on crude. You can unwind this early to
capture a move. This vehicle gives room to monetize moves in crude prices both on the upside and
downside. This structure has a relatively high delta, should crude move higher and can help
offset/compensate for your premium paid should crude move lower, but stay above the barrier.
Implied Vol & Price Curves:
The degree of backwardation has subsided but vols are still very low compared to their average over the last 10 years.
Investors looking to express a bullish view on Brent crude oil can take advantage of premiums which are close to 10-year
lows.
IPE Brent *Imo Implied Vol. Mid Implied Vol
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1.1
1.0
0.9
0.8
0.7
E. 0.6
0.5
0.4
0.3
0.2
2003 2004
2005
2006
2007
2008
2009
2010 2011 2012
2013
2014
Date
115.0
112.5
110.0
c 107.5
105.0
102.5
a.
100.0
97.5
95.0
92.5
0
I--IPE Brent 1M implied vol - Mid implied volatility
IPE Brent forward curves
5
10
15
20
25
30
35
Date
-B-ClosePrice (04-Nov-2013) -e-Close_Price (04-Oct-2013) -A-Close_Price (05-Sep-2013)
Source: DB AnalyzerLite, 11/5/13
Please join
Deutsche Bank
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for a Conference Call
on
Monday November 25, 2013
10am ET
The Outlook for Oil Prices in 2014
Hosted by:
Soozhana Choi
Chief Oil Strategist and Head of Energy Research
Paul Sankey
DB Oil & Gas Analyst
1 Week REPLAY:
U.S:
Intl.:
Amy Tan
Equity Focus Group - North America
60 Wall Street
New York, NY 10005
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EFTA01132346