EFTA01472080.pdf

Subject: Short Latam FX Ideas [I] From: Daniel Sabba cffi. Date: Tue, 03 Feb 2015 10:54:37 -0500 To: jeffrey E. <jeevacation@gmail.com> Cc: Paul Morris Vahe Stepanian Bcc: Classification: For internal use only Jeffrey, Carry in BRL is close to 11% and ly implied vols are around 14-15%. As we discussed, this obviously makes buying puts on these currencies very expensive. Other LatAm pairs offer lower vol and carry but could be negatively impacted in a distress scenario in the region. A negative regional "halo-effect"? CLP has carry around 3% and ly implied vol around 10%. Additionally, Chile is very exposed to the commodity complex. More details below. Trade Idea: Buy Puts on LatAm Currencies. Since June 2014, BRL, COP, CLP, MXN and PEN have all depreciated against USD, falling 17.8%, 28.2%, 15.0%, 16.0% and 10.1% respectively. These currencies have also exhibited a high positive realized correlation over this period. {cid:1 =OFBBF773DFF1005D8f9e8a93df9386909@db.com} {cid:2 =OFBBF773DFF1005D8f9e8a93df9386909@db.com} COP, CLP, MXN and PEN benefit from significantly lower carry costs compared to BRL. In addition, many of these currencies currently have lower implied volatilities and less pronounced skew. Therefore it maybe more efficient to express bearish Latam views through COP, CLP, MXN and PEN compared to BRL. {cid:3 =OFBBF773DFF1005D8f9e8a93df9386909@db.com}fcid:- 4 =0FggF773DFF1005D8f9e8a93df9386909@db.coml{cid:- 5 =OFBBF773DFF1005D8f9e8a93df9386909@db.com} Spot ref: USDBRL: 2.6991 USDCOP: 2373.07 EFTA01472080 USDCLP: 626.75 USDMXN: 14.7622 USDPEN: 3.0595 ATMF ly USD calls — Indications: USDBRL, premium: 6.45% (strike = 2.992), mid=5.95% USDCOP, premium : 5.53% (strike = 2449.42), mid=5.03% USDCLP, premium: 4.50% (strike = 645.4), mid=4.10% USDMXN, premium: 5.00% (strike = 15.1057), mid=4.60% USDPEN, premium: 3.00% (strike = 3.1979), mid=2.50% Looking forward to discussing further. Regards, Daniel Daniel Sabba Key Client Partners Deutsche Bank Securities Inc. Tel. Mobile Email EFTA01472081