Friday, January 20, 2012

Deutsche Bank (DB) - Vol Dips To 5 Month Low; Earnings Due Out in 2 Weeks

DB is trading $42.14, up small with IV30™ down 8.1%. The LIVEVOL® Pro Summary is below.


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Deutsche Bank AG is a global investment bank. The Company offers a variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world.

This is a vol note -- specifically depressed vol that has now breached a lower bound that has held for 5 months (ish). All of this is in the landscape of an earnings announcement due out in less than two weeks. Let's start with the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

Let's start with the stock portion (the top half).  We can see DB was in the upper 50's half a year ago, dipped into the high 20's and recently has popped significantly back to the 40's. On the vol side, we can see the implied has tracked the HV20™ (sort of) while the HV180™ (the long-term historical realized vol) has been steadily climbing.

The interesting part, at least IMHO, is that the implied has just breached 52% -- a level which it has traded above for about 5 months. I drew in that horizontal yellow line to help illustrate the level. As far as I can tell, the next DB earnings announcement is in early Feb -- so that's implied vol at a 5 month low while earnings are due out in the immediate-term. Hmmm...

Let's turn to the Skew Tab.

The skew shape across Feb and Apr is quite pretty -- "normal" and smooth. There aren't any obvious anomalies, and Feb is slightly elevated to Apr due to earnings.

Finally, let's turn to the Options Tab.

We can see Feb and Apr are priced to 51.58% and 49.67% vol, respectively. Note that the Apr vol is actually below 50%. The Feb ATM straddle is priced to ~$4.65 mid-market.

This is trade analysis, not a recommendation.

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