EFTA01749754.pdf

To: jeevacation©gmail.com Cc: Subject: Fw: AAL + US Airlines [C] From: Vahe Stepanian Sent Wednesday, October 15, 2014 6:21:04 PM Attachment Attachment Attachment Attachment Attachment Attachment Attachment Attachment Classification: Confidential Jeffery - following up on the below. Would appreciate if you could please clarify whether you wish to: A) Unwind existing AAL position and/or B) Sell puts per the below on DAL, UAL, AAL, and LUV. If B, should we use $500k notional on each name for a total of $2mm total exposure to the underliers (in addition to your existing AAL position)? Thanks, Vahe -- Forwarded by Vaho Stepaniantdbcom on 1011512014 02:18 PM — From: Vahe Stepanian/dbldbcom To. Cc: Date: 10/152014 11.48 NA Subject Re: AAL • US Aidines (CI Classification: Confidential Jeffrey - to clarify, which would you like me to do: A) Unwind existing AAL position and/or B) Sell puts per the below on DAL, UAL, AAL, and LUV. If B. should we use $500k notional on each name for a total of $2mm total exposure to the underliers (in addition to your existing AAL position)? Thank you, EFTA_R1_00046633 EFTA01749754 Vahe From: ',ahoy E." goovacation©gmail.com> To: Date: 10/15/2014 11:37 AM Subject: Re: AAL • US Airlines (C) sell it all On Wed, Oct IS, 2014 at 11:24 AM, Vahe Stepanian wrote: Classification: Confidential Good Morning Jeffrey - quick update on ML. 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 summarize, 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 by Tazia Smitledb/dboom on 10/15/2014 10:48 AM -- From: To: Date: 10/15/2014 00:38 AM Subject: KCP Capital Markets Ideas - US Airlines (I) EFTA_R1_00046634 EFTA01749755 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 attractive valuations, particularly as the majors are expected to produce record free cash flow this year. Delta Airlines is about 20% off from the September high (Source: Bloomberg, Oct-15, 2014) 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. WTI crude oil is down almost 25% since the June peak EFTA_R1_00046635 EFTA01749756  -NN (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 volatility has rallied dramatically recently (1m 90% vol for Delta Airlines shown) EFTA_R1_00046636 EFTA01749757  _ant (Source: Deutsche Bank, Oct-15, 2014) Trades: - Investors take in 3.9% premium for selling Delta Airlines November 30-strike puts (exchange-traded): EFTA_R1_00046637 EFTA01749758  (Source: Bloomberg, Oct-15, 2014) - Investors take in 4% premium for selling United Airlines November 38-strike puts (exchange-traded): EFTA_R1_00046638 EFTA01749759  • N (Source: Bloomberg, Oct-15, 2014) - Investors take in 3.4% premium for selling American Airlines November 27-strike puts (exchange-traded): EFTA_R1_00046639 EFTA01749760  (Source: Bloomberg, Oct-15, 2014) - Investors take in 3.4% premium for selling SouthWest Airlines November 28- strike puts (exchange-traded): EFTA_R1_00046640 EFTA01749761  (Source: Bloomberg, Oct-15, 2014) THIS MATERIAL IS INTENDED FOR INSTITUTIONAL CUSTOMERS ONLY AS DEFINED BY FINRA 4512(c). 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