EFTA01385915.pdf

-o 12015 Outlook Recommendations ry Trade Detail Rationale Risks Opened Entry Current P/L Overly aggressive Fed could produce a FVH6 Sell FVH6 puts versus buy like "tightening tantrum" which is negative for Spreads tighten in a +10.bp OPdon structured swaption for zero risk asset valuations, likely producing sell-off beyond the 12/19/14 Swaption premium hedging flows in swap spreads that push strikes +9bp spreads wider. The post-Fed sell-off has left the o ptkin Buy lxl, tyly receiver spreads Maximum total loss is spot/forward spread near multiyearost- p 12/19/14 29c with strikes ATMF and ATMS the premium outlay crisis highs. This curve segment might be expected to steepen if, for example, higher inflation Swaps RV Pay 3yly versus 2y1y produces greater pricing power, or if the Curve flattens 12/19/14 40 long-absent cyclical increase in productivity finally materializes. 1X2 receiver spreads: Buy Vulnerable to rally $100mn 3M10Y ATMF vs sell This a positive carry trade that captures the below the breakevens 12/19/14 $200mn 3M10Y 19bp OTM central path for the 10Y sector during Ql. with potentially receivers at zero net cost unlimited downside. Sell 1X2 payer spreads at the Vulnerable to rally The repricing of Fed hikes could begin in short end: Sell $100mn 6M3Y below the breakevens, 02 with the short end rebounding sharply 12/19/14 ATMF vs. buy $200mn34.6bp with potentially after initial rally. OTM payers at zero net cost unlimited downside. Sell $100mn 6M10Y straddles With expectations of Fed hikes, volatility Option Unilateral spike in vs. buy $300mn 6M3Y straddles should move to the front end of the curve, 12/19/14 backend vol. for a net premium of 176K while the back end movements remains Quiet flatteners: sell $1bn 6M o ption 68/10s 9.6bp OTM curve cap vs. Potential for considerable beer flattening Curve steepens. 12/19/14 buy$1bn 6M 66/10s atmf/9.6 should the market reprice the Fed hikes. curve floor spread at zero cost This captures the risk of bullish flattening Quiet bulls: Sell $100mn 1Y10Y of the curve where growth is unable to o ption 60bp OTM payers vs. buy take off either due to fundamental Sell-off beyond 3.10%. 12/19/14 $100mn 1Y10Y ATMF/33 weakness or in response to a policy receiver spreads costless mistake of premature hikes. 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- 6M dual digital: 2s> FmlObp & Loss equal to the Deutsche Bank Securities Inc Ol mistake trade where premature hikes 12/19/14 10s < F-10bp offer 11.5% options premium cause a rally at the back end. Given the impressive run equities have had Equity/rates hybrids: Buy 19-Jan- on the back of both normalization of the Limited downside with OptiOn 2015 SPX 100/90 put spreads markets as well as the accommodation. maximum loss equal to 12/19/14 subject to 54 > Fwc1+25bp, offer Fed exit is likely to be disruptive for their the options premium. short-term performance. Sen. AntscAt Bent CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0087383 CONFIDENTIAL SDNY_GM_00233567 EFTA01385915