From: Richard Kahn

From: Richard Kahn To: "Jeffrey E." <[email protected]> Subject: Re: Russia Date: Sat, 15 Oct 2016 20:37:51 +0000 18 puts are Rsx may 2017 Richard Kahn HBRK Associates Inc. On Oct 14, 2016, at 2:14 PM, jeffrey E. <[email protected]> wrote: what are 18 puts? On Fri, Oct 14, 2016 at 2:12 PM, Richard Kahn < > wrote: i spoke with Paul Barrett and he proposed two ideas on Russia: Ruble / USD Put Spreads - 63.017 at 2pm Option I buy 63 x 70 spread which will cost 4% to make 11% - 2.75x your premium ex: 100,000,000 x 4% = 4,000,000 premium max profit 4,000,000 x 2.75 = 11,000,000 Option 2 buy 65 x 75 spread which will cost 4% to make 16% - 4x your premium ex: 100,000,000 x 4% = 4,000,000 premium max profit 4,000,000 x 4 = 16,000,000 Option 3 buy 70 x 80 spread which will cost 2% to make 14% - 7x your premium ex: 100,000,000 x 2% = 2,000,000 premium max profit 2,000,000 x 7 = 14,000,000 RSX - at 18.44 at 2pm do a risk reversal with the following 2 levels for may 2017: Option I buy 18 puts 1.75 EFTA00814882 sell 21 calls for .75 net cost 1.00 paul believes that if RSX goes up 15% to 21 or so then S&P and oil will rally and potentially your underlying equities will offset any exposure paul also asked if he can review your equities as well and offer his advice Option 2 buy 17 puts 1.35 sell 22 calls for .60 net cost 0.75 Richard Kahn fl Begin forwarded message: From: "Ens, Amanda" Subject: Russia Date: October 14, 2016 at 10:48:29 AM EDT To: Richard Kahn Rich. For a bearish Russia view in the medium term (without having an ISDA), you could buy puts on RSX — VanEck Vectors Russia ETF. Russian equities are highly correlated to RUB (chart below). Buy a RSX vanilla put • RSX 19-May 2017 expiry ATM strike costs about —12.4% premium Buy a RSX put spread EFTA00814883 • RSX 19-May-2017 18x12 put spread (97% x 65% strikes) costs -$1.60 or 8.9% on the 18-strike leg (3.75x max gross payoff). You're not saving that much by spreading it, so I prefer the vanilla. We looked at pricing contingent options but liquidity is poor. If there is another market that you're also bearish, we could look to cheapen the premium with a best-of- put (eg. Best-of-put on Russia and China). Digitals and contingent options didn't price well due to liquidity. While optionality isn't cheap, the trade looks interesting as this is not yet a consensus view. Our strategists and much of the Street is constructive RUB given a hawkish central bank, decent carry and stronger oil. Russia's central bank governor reiterated that monetary policy should be focused on maintaining positive real rates, with equilibrium she says around 2.5-3% in the longer term. Before achieving 4% inflation target, she says real rates will be kept higher. Reads as hawkish and supportive for RUB in the short term, as positive real rates should support capital flows. RUB vs MICEX (Russian equity index) <image001.jpg> Russia is r.40/0 of EM ETFs VWO and EEM More EM Inflows: A large creation in Vanguard FTSE EM ETF (VWO) <image005.jpg> Source: Bloomberg Amanda Ens Director Bank of America Merrill Lynch Merrill Lynch, Pierce, Fenner & Smith Incorporated The power of global connections"( EFTA00814884 <image004.png> 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. please note The information contained in this communication is confidential, may be attorney-client privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of JEE Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error, please notify us immediately by return e-mail or by e-mail to [email protected], and destroy this communication and all copies thereof, including all attachments. copyright -all rights reserved EFTA00814885