EFTA01189598.pdf

From: Tazia Smith <~le To: [email protected] Cc: , Paul Morris , Caroline Kitidis , Vahe Stepanian Subject: Brent Solutions [C] Date: Tue, 05 Nov 2013 18:52:53 +0000 Inline-Images: unnamed; unnamed(I); unnamed(2); unnamed(3) Classification: Confidential Jeffrey - Below please find solutions that can be combined to reflect your view that transporUsupply constraints will cause Brent to spike within the next 5-6months for a brief (-2 week) period; your objective is to monetize both the potential upside spike and downward reversion. We know you've traded risk-reversals and knock-in options in the past. The knock-in puts are compelling to reflect your reversion view. Examples below include three iterations of 6mo knock-in puts on the June 2014 contract (currently trades —1.9% below spot). Implied vol is near 10yr lows. Consider a risk reversal combined with a KI put. Consider overlaying these on an absolute return note given attractive curve and vol entry point. Please find indicative levels below. Will call you to discuss further. Best Regards, Tazia Knock-In Put Iterations: Indicative levels only, subject to market movement. Source: DB Commodities Structuring, as of 11/4/13. Brent Jun14 reference: $104.2 Brent spot: $106.5 (1) 6mo KI Put Put on Jun14 Brent, strike 115. Option knocks in only if Brent Jun14 closes above 115 on any day. Indicative Offer: -$1.96/bbl (-1.9%) Indicative cost on $5mm notional: $95,000 Max Loss: Premium Paid (2) 6mo KI Digital Put Digital Put on Jun14 Brent, strike 115. Option knocks in only if Brent Jun14 closes above 120 on any day. Indicative Offer: 11.9% Digital Payout: 100% Indicative cost on $1mm notional: $119,000 Max Payout on $1mm notional: $1,000,000 (-8.4x premium paid) Max Loss: Premium Paid (3) 6mo Max Strike Put EFTA01189598 If Brent Jun14 fixes above $115/bbl on any day during trade, then: max [ 0, Maximum Brent Jun14 fix during trade — Brent Jun14 at expiry — $10/bbl] Indicative Offer: —$1.51/bbl (-1.5%) Indicative cost on $5mm notional: $75,000 Max Payout: Max Brent Jun14 fix during trade — Brent Jun14 at expiry — $10/bbl Max Loss: Premium Paid Upside Exposure Solutions: Indicative levels only, subject to market movement. Source: DB Commodities Structuring, and DB AWM Structured Solutions, as of 11/4/13. Brent Jun14 reference: $104.2 Brent spot: $106.5 (1) Risk Reversal: Buy 6m $109.41 call (105% of Jun14 ref): $3.51/bbl Sell 6m $85 put: $0.95/bbl Net Debit: $2.56/bbl (-2.5%) Indicative cost on $5mm Notional: $125,000 Max Loss: $87.56/bbl For your reference: 6m $104.2 call (ATM): $5.90/bbl (-5.7%) 6m $109.41 call (105% of Jun14 ref): $3.51/bbl (-3.4%) 6m $85 put: $0.95/bbl (—0.9%) 6m $90 put: $1.58/bbl (-1.5%) (2) ATM 6mo Swap A futures look-alike in the form of a Jun14 ATM swap, which has positive carry of —$2/bbl (differential between Jun14 and spot) (3) Absolute Return Note on Brent Structure Absolute Return Note on Brent Crude Underlier: Brent Barrier Observation: European Maturity: 2yrs Upside Max: Uncapped Barrier Level: 82.5% Max Loss: 100% In fully-funded form, the absolute return structure prices well on crude. You can unwind this early to capture a move. This vehicle gives room to monetize moves in crude prices both on the upside and downside. This structure has a relatively high delta, should crude move higher and can help offset/compensate for your premium paid should crude move lower, but stay above the barrier. Implied Vol & Price Curves: The degree of backwardation has subsided but vols are still very low compared to their average over the last 10 years. Investors looking to express a bullish view on Brent crude oil can take advantage of premiums which are close to 10-year lows. IPE Brent *Imo Implied vol - Mid Implied Vol EFTA01189599  1.1 1.0 0.9 0.8 3V 0.7 0.6 0.5 0.4 0.3 0.2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Date I--IPE Brent 1M implied vol - Mid implied volatility IPE Brent forward curves 115.0 112.5 110.0 = 107.5 a105.0 .0 ,..3; 102.5 a. 100.0 97.5 95.0 92.5 0 5 10 15 20 25 30 35 Date -8-ClosePrice (04-Nov-2013) -e-Close_price (04-Oct-2013) -A-Close_Price (05-Sep-2013) Source: DB AnalyzerLite, 11/5/13 EFTA01189600 Tazia Smith Director i Key Client Partners - US Deutsche Bank Securities Inc Dratchn Assaf K INstallh Mananemian_ PPanoloV ilMfOnn This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. EFTA01189601