From: Vahe Stepanian

From: Vahe Stepanian To: [email protected] Cc: Nay Gupta Paul Morris Vinit Sahni < Subject: Fw: Position for EURUSD lower ahead of ECB via vanilla nut or collar [C] Date: Tue, 03 Jun 2014 14:47:07 +0000 Inline-Images: unnamed; unnamed(1); unnamed(2); unnamed(3); unnamed(4); unnamed(5) Classification: Confidential Good Morning Jeffrey - please see below per Nav's request. To summarize, two EURUSD trade ideas: Trade 1: Buy a 1-month European style 0.22% OTMspot EURUSD put, offered at 0.67% of EUR notional Trade 2: Buy a 3-month European style 1.03% OTMspot EURUSD put, funded by selling a 3-month European style 0.81% OTMspot EURUSD call, offered at zero premium Thank you, Vahe Forwarded by Apurva Guplaidbidbcom on 06/03/2014 03:14 PM ---- • ECB members have been increasingly vocal about the link between EUR currency strength and low inflation, and the need for a lower EURUSD • Today's lower-than-expected Eurozone CPI print is further reason for ECB to loosen monetary policy, given that ECB Governing Council already shares a consensus view on negative deposit rate and unsterilized SMP • EUR rates have room to fall further, while USD rates should rise as economy recovers, weighing on EURUSD - Forward EONIA out of the June ECB meeting is 12bp (11bp below the current fix), and that out of the July ECB meeting is 9bp - Full liquidity measures (like LTRO, lowering reserve requirements or QE) could see EONIA drop to around zero • Inflows into European assets, which have supported EURUSD past year, have been slowing down lately which would also weigh on EUR strength - Net purchases of European assets by US investors fell to zero in Q1-2014, while Japanese investors were net sellers (Q1-14 being the first negative quarter in 2 years) Trades I like best to play EURUSD lower: Trade 1: Buy a 1-month European style 0.22% OTMspot EURUSD put offered at 0.67% of EUR notional Ref spot: 1.3610 Put strike: 1.3580 (0.22% OTMspot) Breakeven: 1.3489 1m forward: 1.3609 Mid premium: 0.64% of EUR notional Put option vol: 6.6% Scenario analysis for Trade 1: Table shows mid premium (as % of EUR notional, that investor pays) for the above trade, as spot and time to expiry vary (only the highlighted premium for current spot is the offer level) EFTA01206094 Spot % move Spot level lm Time to expiry 15d At exp 6% 1.4426 0.010% 0.00% 0.000% 4% 1.4154 0.030% 0.01% 0.00% 2% 1.3882 0.150% 0.06% 0.00% 0% 1.3610 0.67% 0.45% 0.00% -2% 1.3337 1.97% 1.89% 1.79% -4% 1.3065 3.96% 3.96% 3.79% -6% 1.2793 6.16% 6.17% 5.80% EURUSD 1m implied volatility - 5 year history The volatility is still near the lower end of its recent historical range, hence the low premium 18.0000 16.0000 14.0000 12.0000 10.0000 8.0000 0.4325 2009 2010 2011 2012 2013 2014 ElittISDV1m Curry (Elik-USD OX DO Daily 04:W2009-03/N2014 Copyright: 2014 Bloomberg Finance L.P. 03-1m-2014 13:29:57 Trade 2: Buy a 3-month European style 1.03% OTMspot EURUSD put funded by selling a 3-month European style 0.81% OTMspot EURUSD call offered at zero premium Ref spot: 1.3610 Put strike: 1.347 (1.03% OTMspot) Call strike: 1.372 (0.81% OTMspot) 3m forward: 1.3611 Mid premium: -0.03% of EUR notional (i.e. investor would receive 0.03% of EUR notional) Put option vol: 6.0%, call option vol: 5.9% Scenario analysis fo Trade 2: Table shows mid net premium (as % of EUR notional, that investor pays) for the above trade, as spot and time to expiry vary onl the hi hlighted remium for current s ot is the offer level) Spot % Spot Time to expiry move level 3m 2m lm At exp 6% 4% 2% 0% -2% -4% -6% 1.4427 1.4154 1.3882 1.3610 1.3338 1.3066 1.2793 -4.98% -4.94% -4.90% -3.24% -3.18% -3.21% -1.56% -1.50% -1.48% 0.00% -0.02% -0.06% 1.480% 1.40% 1.28% 3.25% 3.18% 3.13% 5.32% 5.30% 5.30% -5.15% -3.170/0 -1.18% 0.00% 0.98% 3.00% 5.02% EURUSD spot FX rate -1 year history EFTA01206095 Jun Sep Dec 2013 EUR Cumcy (Faro Spot) Daily 03JUN2013-03JUN2014 I Apurva Gupta Associate I Key Client Partners Capital Markets Group Deutsche CIB Centre Private Limited Asset and Wealth Management Email PacinoNy ?meat**. KCP Capital Markets 1.4000 1.3800 1.3400 1.3200 1.3000 1.2800 Mar 2014 Copyright 2014 Bloomberg Finance 03-Jun-2014 15:17:54 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. EFTA01206096