DB - Earnings & Vol Skew Update

Discussion in 'Trading' started by livevol_ophir, Feb 4, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    DB is trading 60.19, down 6% after earnings this morning with a crashing market. The link to the first blog is <a href="http://livevol.blogspot.com/2010/02/db.html"><b>HERE</b></a>

    The company has traded over 4,500 options today on total daily average option volume of 1,464. The Company Tab snapshot is in the article.

    You can see the IV30&#8482 is up 3 points today or 6.7%. So what's so interesting about that? DB had earnings this morning - the vol crush never happened. It seems that the broader market problems are having a greater impact on this large financial than its company specific news. The skew from today and yesterday is included in the article.

    Note that - well - they look the same. Earnings vol isn't always a sale for several reasons - usually b/c the earnings move could be greater than the IV indicated. Here's another reason - the vol went up <i>and</i> the stock moved 6%. A good example to remember - it wasn't intended, but it worked out pretty well as an illustration.

    Details, charts, vols, prices here: http://livevol.blogspot.com/2010/02/db-update.html
  2. Ok Ohir(it's Nathan), here is my 2 cents. I haven't kept up on DB since late '07 when I was shorting all of the home builders and mortgage lenders into bankruptcy or nationalization(FRE, FNM).

    However when I was doing the research, I noticed that the majority of the subprime worthless residential real estate paper that was underwritten here in the US wasn't by FMN, it was by DB, to the tune of more than 10 TRILLION DOLLARS+!

    This paper hasn't gone away(they sure are trying to "push it under the rug". It will be interesting when mark to market is unsuspended by the FASB. Perhaps then we will see the 500+ TRILLION DOLLARS in virtually worthless OTC derivitie paper show back up on the global bank balance sheets. If that happens, we the DOW makes new lows.

    Anyhow, another down day and I prepare for Catastrophic wave C!