From: Daniel Sabba .c:

From: Daniel Sabba .c: > To: —jeferey <[email protected]> CC: Ie, Stewart Oldi e, Vahe Ste aniar . , "Arian Dwyer" , "'Richard Kahn"' Subject: RE: Using Russell puts as a proxy to short HY market. [C] Date: Tue, 01 Sep 2015 23:53:30 +0000 lane-Images: image003.jpg; image004.png; image005.png; image006.png Classification: Confidential Trying to keep it honest, we looked into PnL of this Idea today. It wasn't bad. The idea was to use 3-month, 95% Russell 2000 index (ITY) puts to hedge a High Yield (HY) selloff. On 6/25, with RTY at 1283 — clients could have purchased Sept 1220 puts CD —520/contract. Given market volatility last week, clients could have unwound the trade at —5120/contract Russell 2000 Index Sept 1220 Put — Historical chart From: Daniel Sabba Sent: Thursday, June 25, 2015 10:52 AM To: Jeffrey E. Cc: Paul Morns; Stewart 0ldfield; Vahe StepanIan; Ariane Dwyer; Richard Kahn Subject: Using Russell puts as a proxy to short HY market. [C] Classification: Confidential Jeffrey. I called you yesterday and left a message with M. A few large investors have gone on the record over the past days calling for frothiness In the High Yield market. The rationale typically used Is the richness of the asset class and recent proliferation of covenant-lite deals. We have been working on using Russell (and IWM US ETFs) puts to hedge for a HY sell-off and would like to discuss with you. Russell risk premium can be seen as tied to HY and put options are historically cheap (see below). (WM 93% putpcemia in historical lows (tdapramlums for im 3m and 6m ftMILES). We looked at data over the tast 10 years and found the 3m 95% puts to be around the 3rd historical percentile. EFTA01185479 IWM 95% Put Premia as a V. of Spot 16.0% 14.0% 12.0% 10.0% ILO% 6.0% 4.0% 2.0% 0.0% 28-Jun-05 28-Jun-06 28-Jun-07 28-Jun-08 28-Jun-09 28-Jun-10 28-Jun-11 28-Jun-12 28-Jun-13 28-Jun-14 .1 . - lm 3m —6m Historical roiling 3-month performance of HYG US ETF and RTY index. The historical performance below illustrates that when large moves happened, they co-occurred in both RTY Index and HYG US ETF (since 2007). Russell vol in historical lows and historically cheap to SSP (In mietive abed:Auto tenne_for_95nrikklm vols) 25.1un-08 25.1un-10 —.SOX3M-Maturity 95%-Strikelmplied Volatility —.RUT 3M-Maturity9S%-Strike Implied Volatility —Spread EFTA01185480 Looking forward to discussing further. Regards. Daniel Daniel Sabba Key Client Partners mai This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. EFTA01185481