EFTA01384829.pdf

From: "jeffrey E." [jeevacationggmail.com] Sent: 11/13/2014 04:05 PM AST To: Daniel Sabba Subject: Re: Follow-up on EUR hedging discussion [C] prices of puts and calls? On Thu, Nov 13, 2014 at 2:38 PM, Daniel Sabba wrote: Classification: Confidential Classification: Strictly Confidential Jeffrey, I met with the head of FX trading of our investment bank to discuss the EUR hedging question you posed. To build a multi-billion short, a solution would be to implement a combination of spot, forward and options transactions over the course of several trading days/weeks. We propose discussing an execution plan in case you would like to pursue that route. We wanted to share with you the following parameters, which are indications for a EUR 1bn short delta executed live in a typical trading day. Indication Considerations: - Spot ref 1.2450/1.2451 - a live execution of EUR lbn spot could indicatively be done 20pips below screen bid at 1.2430 - 5y EURUSD forward mid 1.3530 - The indications below are for execution of one leg only, not all of them as a package - You mentioned this was a consideration for a client of yours - these indications assume standard ISDA/CSA terms - The levels below would be improved if instead of transacting EUR 1bn delta, you did a smaller size. I have also included the levels for EUR 25mm delta Indicative Transaction Terms (for EUR 1bn delta): A. 5y EURUSD premium neutral risk reversal (long EURUSD put struck at 1.2450 / short EURUSD call struck at 1.4450). EUR 1.5bn notional per leg would lead to a net delta of EUR 1.05bn B. Short EURUSD 1bn 5y forward. Forward points: 1034/1120 C. 1y EUR puts struck at 1.2450 (spot) offered at 3.10% - EUR 2.3bn notional would lead to a delta of EUR 967mm Indicative Transaction Terms (for smaller size - EUR 25mm delta): A. 5y EURUSD premium neutral risk reversal (long EURUSD put struck at 1.2450 / short EURUSD call struck at 1.4600) B. Short EURUSD 1bn 5y forward. Forward points: 1040/1125 C. ly EUR puts struck at 1.2450 (spot) offered at 2.90% As you can see the pricing for smaller size is much better. Please advise on how you would like to proceed. Best regards, Daniel CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0085376 CONFIDENTIAL SDNY_GM_00231560 EFTA01384829