EFTA Document EFTA01357462

To: jeffrey E.' Cc: Paul Morris; Vahe Stepanian; 'Richard Kahn' Subject: RE: short crude vol strategy - follow-up analysis Classification: Public Jeffrey, Per my previous email, WTI moved down over 8% on Wednesday and up 7% on Tuesday. As discussed at our meeting, this level of high realized volatility is very negative to a short straddle with daily delta hedging strategy. We refreshed the analysis below to include the Tuesday's and Wednesday's moves. We would like to point out this trade has moved over 10% down, and ask you on whether you continue to want to hold it. Trade date: 13-Jan Valuation date for all the numbers below: 4-Feb We have rounded various numbers for ease. Index return since trade date: -10.84% The index has lost money basically because realized vol has been much higher than implied, and also implied has gone up a lot (however, we wouldn't pay a lot of attention to the implied going up a lot; since finally what will count as more days pass is what realized is doing). Some stats on this are below. Strike Implied- Current Contract Vol strike Date Realized vol Realized Implied CLH5 60% 13-Jan-15 79% -19% 84% CU5 434 13-Jan-1.5 77% -33% 56% CLK5 42% 14-Jan-15 734 -31% 544 This loss has occurred over a period of 15 Index Business Days. Looking back since index inception date, we tried to see how many times such a loss would have occurred over a period of 15 days. This 15 Index Business Day performance represents the 0.6th percentile. Daniel Sabba Key Client Partners Deutsche Bank Securities Inc. From: Daniel Sabba Sent: Tuesday, February 03, 2015 3:19 PM To: 'Jeffrey E.' Cc: Paul Morris; Vahe Stepanian; Richard Kahn Subject: short crude vol strategy - follow-up analysis Classification: Public Jeffrey — this is the analysis we put together and alluded to in the meeting today. It evaluates the performance of the short crude vol strategy since Jan 13'n, when we traded. As discussed, sharp moves up in oil (WTI is up 6% intraday today) are also negative to a short straddle strategy that is delta hedged daily, as it causes realized vol to increase, potentially beyond expectations. If one expects this environment of high realized vol to be short lived, the trade continues to make sense. If one expects it to be a continued paradigm, it might make sense to revisit holding this strategy. Trade date: 13-Jan CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0044047 CONFIDENTIAL SDNY_GM_00190231 EFTA01357462