EFTA01387061.pdf

From: Martin Zeman Sent: 7/17/2018 2:37:49 PM To: 'Paul Barrett CC: Stewart 0ldfield Subject: I/I DB Derivs: Stock Replace Winners ahead of Earnings Lower delta risk during earnings with options This quarter seems to be another where expectations are high and so beats will be shrugged off and misses get punished. Last week we had a note looking at stock reactions to earnings; The initial move on SPX and NDX constituents earnings last quarter were mostly negative, even on beats, before retracing the move higher over the following week or so; misses were hit harder, but also recovered (albeit less). • Average 1day earning move of beats = -0.11% and the average 1week move -0.01%, but the 1M return was 2.5%: roughly in-line with the SPX return over the period of 2.4% • Average 1 day earning move of beats = -1.22% and the average 1 week move -0.74%, but the 1M return was 1.14%: much lower than the SPX return. The question remains if it will look like that again this quarter. The bad NFLX print may be a harbinger to other long- momentum, short-value, or long-growth stocks. Based on last quarter's earnings reactions as well as the possible contagion from factor rotation on the back of Netflix, stock replace winners ahead earnings. SPX & NDX stock replacement candidates based on relatively low vol and outperformance over last 3 months DB Equity Derivatives ATM 1M Next Earnings Implied Move N/3M RV M ATM Short Interest ticket Name Spot 3M Return Report Date on Earnings Ratio Vol %-ile as % of Float MID UR ADVANCED MICRO DEVICES 16.58 57.6% 25-Jul 5.56% 1.01 65.40% 18.14% TRIP UW TRIPADVISOR INC 59.35 41.4% 1-Aug 9.94% 0.77 70.52% 15.78% CMG UN CH IFOTLE MEXICAN GRILL INC 452.06 35.1% 26-Jul 6.84% 0.51 61.81% 10.93% AAP UN ADVANCE AUTO PARTS INC 139.67 29.1% 14-Aug 4.41% 1.08 60.53% 5 42% M UN MACY'S INC 36.99 27.8% 9-Aug 3.20% 0.99 67.36% 14.82% CNC UN CENTENE CORP 133.23 18.8% 24-Jul 3.95% 1.13 53.79% 2.35% ALM UW ALEXION PHARMACEUTICALS INC 134.58 18.8% 26-Jul 6.90% 0.82 54.41% 2.01% ATVI UW ACTIVISION BLIZZARD INC 80.23 17.5% 2-Aug 4.92% 0.96 60.29% 1.43% ADP UW AUTOMATIC DATA PROCESSING 137 12 16.3% 1-Atg 4.17% 0.83 7.4.99%.... 099% NOV UN NATIONAL OILWELL VARCO INC 43.85 15.5% 26-Jul 4.33% 1.03 56.97% 5.93% CBS UN CBS CORP-CLASS B NON VOTING 58.83 15.0% 2-Aug 3.52% 0.87 56.12% 3.10% VRTX UW VERTEX PHARMACEUTICALS INC 181.22 14.2% 25-Jul 4.23% 0.82 57.28% 1.08% AMGN LJW AMGEN INC 194.88 13.7% 26-Jul 3.48% 0.91 39.77% 1.45% APC UN ANADARKO PETROLEUM CORP 72.84 13.7% 31-Jul 3.40% 1.03 60.27% 2.33% HO UN HOME DEPOT INC 198.88 13.7% 14-Aug 2.95% 0.80 36.84% 0.71% DVA UN DAVITA INC 71.71 13.7% 7-Aug 3.24% 1.12 58.33% 4.38% MSCI UN MSCI INC 170.58 13.6% 2-Aug 4.15% 1.12 62.19% 1.30% MAT UW MATTEL INC 16.28 13.6% 25-Jul 1.08 62.78% 21.54% V UN VISA INC-CLASS A SHARES 138.46 13.6% 25-Jul 3.11% 0.81 56.42% 1.39% FEW UW F5 NETWORKS INC 175.68 13.2% 25-Jul 6.27% 1.36 709% 6.26% VFC UN VF CORP 88.80 12.9% 20-Jul 4.59% 2.53 51.74% 1.86% per UN TEXTRON INC 66.68 12.2% 18-Jul 5.16% 2.75 69.84% 2.28% SNA UN SNAP-ON INC 163.87 11.4% 19-Jul 4.73% 2.51 61.40% 12.74% MSFT UW MICROSOFT CORP 104.91 11.4% 19-Jul 185% 1.65 53.51% 0.63% KMI UN KINOER MORGAN INC 17.80 11.1% 18-Jul 3.13% 1.54 35.39% 1-75% Trades: CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0089115 CONFIDENTIAL SDNY_GM_00235299 EFTA01387061