EFTA01362006.pdf

201h Outlook ReCeinrnendatiOnS Trade Detail Rationale Risks Opened Entry Current Pit Buy 1x1, lyly receiver spreads The post-Fed sell-off has left the spot/forward Maximum total loss is 12/19/14 29c with strikes ATMF and ATMS spread near multi-year post-crisis highs. the premium outlay This curve segment might be expected to steepen if, for example, higher inflation produces Swaps RV Pay 3yI y versus 2y1y greater pricing power, or if the long-absent Curve flattens 12/19/14 .40 bp cyclical increase in productivity finally materializes. Sell 1X2 payer spreads at the Vulnerable to rally below The repricing of Fed hikes could begin in 02 with option short end: Sell $100mn 6M3Y the breakevens, with the short end rebounding sharply after initial 12/19/14 ATMF vs. buy $200mn 34.5bp potentially unlimited rally. OTM payers at zero net cost downside. Sell $100mn 6M10Y straddles With expectations of Fed hikes, volatility should Unilateral spike in Option vs. buy $300mn 6M3Y straddles move to the front end of the curve, while the 12/19/14 backend vol. for a net premium of 175K back end movements remains Quiet flatteners: sell $1bn 6M 5s/10s 9.5bp OTM curve cap vs. Potential for considerable bear flattening should Curve steepens. 12/19/14 buySlbrt 6M 5≤/10s atmf/9.5 the market reprice the Fed hikes. curve floor spread at zero cost Quiet bulls: Sell $100mn IYIOY This captures the risk of bullish flattening of the 50bp OTM payers vs. buy curve where growth is unable to take off either OPT Sell-off beyond 3.10%. 12/19/14 $100mn IYIOY ATMF/33 due to fundamental weakness or in response to a receiver spreads costless policy mistake of premature hikes. option Buy $100mn 1Y30Y receivers, Loss equal to the BulVflatteners at the back end. 12/19/14 struck at spot, at 1270c options premium This is a leveraged expression of a policy-mistake option 6M dual digital: 2s> F+10bp & Loss equal to the trade where premature hikes cause a rally at the 12/19/14 I Os < V-10bp offer 11.5% options premium back end. star. Osavelv Berri Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0051303 CONFIDENTIAL SDNY_GM_00197487 EFTA01362006