Wednesday, April 4, 2012

Deutsche Bank (DB) - Vol Pops; Analysts Disagree, Vol Diff to Earnings Disappears

DB is trading $46.53, down 3.6% with IV30™ up 12.4%. The LIVEVOL® Pro Summary is below.


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Deutsche Bank AG is a Germany-based global investment bank. The Company diversifies its activities into three group divisions: Corporate & Investment Bank (CIB); Private Clients and Asset Management (PCAM), and Corporate Investments (CI).

This is a vol note in a dipping stock with somewhat ambiguous perceptions from analysts. I found DB using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.

Let's start with the ambiguous news.

4-3-2012: Deutsche Bank downgraded before the open to Underperform from Neutral at Macquarie

3-23-2012: Deutsche Bank: Upgrade details
As mentioned earlier RBC Capital Mkts upgraded DB to Outperform from Sector Perform noting capital remains in focus and they see scope for Deutsche Bank to bring the capital deficit (EUR6.4 bln relative to 10% CET1 2013) down from their current estimate via the sale of legacy assets, which could help by 60bp. Firm says their forecasts already include some impact of deleveraging on the top line with zero fixed income revenue growth forecast for 2012 in USD terms

Source: Provided by (

See.. ambiguous...

The DB Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side, there's sort of the unmissable recent drop, exacerbated by today's move down. On 3-26-2012 the stock closed at $52.16. As of this writing the stock is down 12.1% in those six (and a half) trading days.

On the vol side, we can see how depressed both the short-term historical realized (HV20™) and short-term implied (IV30™) got. Just two days ago, IV30™ closed at 36.52%. A day later (yesterday), HV20™ closed at 36.27%. So, in a sense, the implied and historical vols agreed on a "fair value." With the moves yesterday and today, HV20™ should pop over 45% by tomorrow (it's calculated close-to-close). IV30™ is up 17% in just two and a half days. Vol is on the move... and so is the stock.

The Skew Tab (below) illustrates the vols by strike by month.

We can see how all three of the front expiries lie essentially on top of each other. Livevol® has confirmed that the next earnings release is due out 4-26-2012, which is outside of Apr expiry, yet Apr and May vol are almost the same. Hmmm...

Let's turn to the Options Tab, for completeness.

Putting some numbers to the vols, we can see 42.74%, 44.14% and 43.80% for Apr, May and Jul expiries, respectively. I do note that even the OTM puts in the earnings month are priced to vol substantially below the HV180™ (70.76%).

This is trade analysis, not a recommendation.

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