EFTA01365050.pdf

Net "delta" in AAPL listed option market I DB analyzed every AAPL — Option traders will hedge their positions by trading in the underlying stock to maintain a "delta" neutral listed option trade that position to stock price performance (i.e., sell calls and buy stock such that they are indifferent to changes occurred from January in the stock price) 2013 to February 2014 — Looking at the net deltas of actual option activity shows that Fridays are more likely to see selling activity, These trades were while Mondays are more likely to see buying activity classified as bullish or A \erage net delta bearish depending on (in shares) % of days negative % of days positRe whether they traded at the Friday (99,292) 63.8% 36.2% bid or the offer. So, for Monday 131,618 39.7% 60.3% example, a call that traded on the offer side was Other (373.363) 56.0% 44.0% deemed a bullish trade. — Even though the amount of stock is small relative to Apple's ADTV of 10 - 15mm shares, there is a strong We ignored transactions correlation between this activity and the stock return on the relevant day of the week(a) that traded at mid market Fridays — return vs net delta Mondays — return vs net delta Other days — return vs net delta(b) We then delta-weight this activity to capture a 5% 5% 5% directional view of the 4% 4% • 4% overall options market 3% 3% • • 3% • • 2% 2% 2% 1% •- 1% cc 0% •• et o 2218 (1%) . ft (1%) • • It' • 0.7548 ca s • ••• (2%) • (2%) ••, • • • • • • • • • (3%) • (3%) (4%) (4%) (1,000) (500) 0 500 1,000 1.000 (1O00) (500) 0 500 1,000 Not dolts (sold) bought Net delta (sold) bought Net dolts (sold) bought Deutsche Bank Source: trade-alert.com 6 Eti .tr -F (a) Based on January 1, 2013 to February 14, 2014 (b) The dataset includes some outliers (e.g.. earnings releases) that depress the R. Excluding datapoints that have more than 1mm shares of net delta or absolute value of the return of greater than 5% results in a 0.57 R2 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0055654 CONFIDENTIAL SDNY_GM_00201838 EFTA01365050