EFTA02592683.pdf

From: jeffrey E. <[email protected]> Sent: Wednesday, October 15, 2014 3:33 PM To: Vahe Stepanian Subject: Re: AAL + US Airlines (Cl sell it all On Wed, Oct 15, 2014 at 11:24 AM, Vahe Stepanian «mailto. wrote: Classification: Confidential Good Morning Jeffrey - quick update on AAL. Recall you currently hold the following position: Please let us know should you wish to hold or add to the position. Separately, Vinit / Nav's team in London is highlighting US airlines (majors specifically) per the below. To summari=e, they believe selling lm puts to monetize implied volatility around the 60% level is attractive with 3Q earnings on tap and volatility rising across equity markets. Details included below. Thank you, Vahe Forwarded =y Tazia Smith/db/dbcom on 10/15/2014 10:46 AM From: UzairAcjeel/db ,/=ont> To: Nay Gupta/dbilmillink Vi=it Sahni/db/dbcom@DBEMEA, Date: 10/15/2014 08:38 AM Subject: KCP Capital Markets Ideas - U= Airlines Ill Classification: For internal use only The equity sell-off has left US airlines oversold on a technical basis. We are starting to see interest in getting long the sector given the attrac=ive valuations, particularly as the majors are expected to produce record free cash flow this year. Delta Airline= is about 20% off from the September high (Source: Bloomberg, Oct-15, 2014) EFTA_R1_01775709 EFTA02592683  At the same time, the dramatic drop in oil prices will eventually feed into improved margins. Indeed, this is one of the few US sectors that actually benefit from lower oil prices.g=ont> WTI crude oil=is down almost 25% since the June peak (Source: Bloomberg, Oct-15, 2014) With 3Q earnings on tap through the rest of the month and volatility rising across equity markets, selling lm puts to monetise implied volatility around the 60% level is attractive</=>. Implied volat=lity has rallied dramatically recently (1m 90% vol for Delta Airlines shown)=/b> (Source: Deutsche Bank, Oct-15, 2014) Trades: - Investors take in 3.9% premium for selling Delta Airlines November 30-strik= puts (exchange-traded): (Source: Bloomberg, Oct-15, 2014) - Investors take in 4% premium for selling United Airlines November 38-strike puts (exchange-traded): (Source: Bloomberg, Oct-15, 2014) - Investors take in 3.4% premium for selling American Airlines November 27-st=ike puts (exchange-traded): (Source: Bloomberg, Oct-15, 2014) - Investors take in 3.4% premium for selling SouthWest Airlines November 28-strike puts (exchange-traded): (Source: Bloomberg, Oct-15, 2014) THIS MATERIAL IS INTENDED FOR INSTITUTIONAL CUSTOMERS ONLY AS DEFINED BY FINRA 4512(c). 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