Author Topic: DB - Deutsche Bank AG  (Read 28885 times)

John Hjorth

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Re: DB - Deutsche Bank AG
« Reply #20 on: September 30, 2016, 12:18:06 PM »
TwoCitiesCapital,

Personally, I was not even aware of this topic in the investment ideas forum. Up here in Northern Europe, a lot is being written every day about DB and the calamities of the bank, and it scares the crap out of me, what this might bring, if this bank eventually ends up failing.

What do you indend to do, if you get the shares assigned based on your selling of puts?
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai


TwoCitiesCapital

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Re: DB - Deutsche Bank AG
« Reply #21 on: September 30, 2016, 12:29:58 PM »
TwoCitiesCapital,

Personally, I was not even aware of this topic in the investment ideas forum. Up here in Northern Europe, a lot is being written every day about DB and the calamities of the bank, and it scares the crap out of me, what this might bring, if this bank eventually ends up failing.

What do you indend to do, if you get the shares assigned based on your selling of puts?

I'd probably hold.

The total notional value would be less than a 2% position and I'm ok with that for a bank at 0.20x tangible book value (near my strike price). Would still be one of my smallest equity positions in the portfolio and one that has the opportunity to go up 30-40% in a day if there was an upside surprise.

DB is definitely one of the worst-positioned banks, but that doesn't mean it's going out of business. It'd be tougher for me to sell those options going into an environment like August of 2015 or January 2016, but global stress is lower right now and it's literally ONLY DB causing panic at the moment. The business itself will likely underperform similar banks but I'm ok selling very temporary, 6-week insurance, against another massive decline AFTER a particularly large leg-down for 6-10% of the notional I'm insuring.

Might turn out bad - but typically these types of sales have worked for me in the past (even with energy names) just because fear/greed seem to consistently overprice options after large moves in the underlying. I'd say it probably added close to an additional 1% in returns for my entire portfolio last year by selling select covered calls and cash covered puts in periods of market volatility. 

« Last Edit: September 30, 2016, 12:44:29 PM by TwoCitiesCapital »

SharperDingaan

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Re: DB - Deutsche Bank AG
« Reply #22 on: September 30, 2016, 12:33:39 PM »
We picked up a smallish position shortly after the open this morning. For us its purely a technical position, & bought because it was under the 50 day moving average, & had an RSI in the basement. If we make a quick 5-10K on the punt, it's Xmas money.

SD   

John Hjorth

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Re: DB - Deutsche Bank AG
« Reply #23 on: September 30, 2016, 01:04:13 PM »
TwoCitiesCapital & SharperDingaan,

Thanks for your replies. The only balls still active in production I have are in my two Logitech Wireless Trackball M570. Personally, I stopped breeding about 25 years ago. Other balls still active  [not in productive environment], but only for pleasure and fun.

I really need to think about this.

What are your perceptions of your potential downsides of your positions?
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

TwoCitiesCapital

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Re: DB - Deutsche Bank AG
« Reply #24 on: September 30, 2016, 01:17:58 PM »
TwoCitiesCapital & SharperDingaan,

Thanks for your replies. The only balls still active in production I have are in my two Logitech Wireless Trackball M570. Personally, I stopped breeding about 25 years ago. Other balls still active  [not in productive environment], but only for pleasure and fun.

I really need to think about this.

What are your perceptions of your potential downsides of your positions?

Well, via put options, the most I can lose is 100% of notional if DB gets wiped out in the next 6 weeks so it'd be a hit of <2% to portfolio performance this year.

That's assuming the absolute worst case scenario. If all my covered puts went bust for all positions I've sold them on, it'd be a loss of around 5% and would reduce the optionality value that I have in holding cash. A reasonable trade off for the 5-10% returns I'm earning on that cash in periods measured in weeks and not months.

glorysk87

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Re: DB - Deutsche Bank AG
« Reply #25 on: September 30, 2016, 01:52:04 PM »
Well, via put options, the most I can lose is 100% of notional if DB gets wiped out in the next 6 weeks so it'd be a hit of <2% to portfolio performance this year.

That's assuming the absolute worst case scenario. If all my covered puts went bust for all positions I've sold them on, it'd be a loss of around 5% and would reduce the optionality value that I have in holding cash. A reasonable trade off for the 5-10% returns I'm earning on that cash in periods measured in weeks and not months.

Minor correction: 100% of notional minus the premium you collected :)

SharperDingaan

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Re: DB - Deutsche Bank AG
« Reply #26 on: September 30, 2016, 06:14:47 PM »
TwoCitiesCapital & SharperDingaan,
Thanks for your replies. The only balls still active in production I have are in my two Logitech Wireless Trackball M570. Personally, I stopped breeding about 25 years ago. Other balls still active  [not in productive environment], but only for pleasure and fun.

I really need to think about this.

What are your perceptions of your potential downsides of your positions?


We're pretty sure our real risk is just volatility and not a wipe-out. DB is a GSIB and backed by the Bundesbank - whether they wish to publicly acknowledge it or not. We're also pretty confident the Germans will not tolerate the ruthless mocking - if they can't get their sh1t together.
https://en.wikipedia.org/wiki/List_of_systemically_important_banks

We only have 2500 shares, and 3-4 euro is not a big stretch.

SD


 


« Last Edit: October 01, 2016, 03:28:13 AM by SharperDingaan »

dwy000

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Re: DB - Deutsche Bank AG
« Reply #27 on: September 30, 2016, 08:06:27 PM »
The possibility of them going bust is virtually nil.  But there's a pretty wide acknowledgement that they will need to issue additional new equity which could dilute the crap out of the existing stock price.

SharperDingaan

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Re: DB - Deutsche Bank AG
« Reply #28 on: October 01, 2016, 03:39:21 AM »
The possibility of them going bust is virtually nil.  But there's a pretty wide acknowledgement that they will need to issue additional new equity which could dilute the crap out of the existing stock price.

Agreed, that were it you or I that would be the outcome ... but this will be a central bank solution, and reputation is on the line. It wouldn't surprise us to see a whole lot of 'special' CoCo/QE and long term repos. Probably some dilution, but not the major dilution that most are thinking of.

SD
« Last Edit: October 01, 2016, 03:40:52 AM by SharperDingaan »

Spekulatius

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Re: DB - Deutsche Bank AG
« Reply #29 on: October 01, 2016, 06:03:28 AM »
The possibility of them going bust is virtually nil.  But there's a pretty wide acknowledgement that they will need to issue additional new equity which could dilute the crap out of the existing stock price.

Agreed, that were it you or I that would be the outcome ... but this will be a central bank solution, and reputation is on the line. It wouldn't surprise us to see a whole lot of 'special' CoCo/QE and long term repos. Probably some dilution, but not the major dilution that most are thinking of.

SD

If the German government will have to bail them out, DB stock is toast. The bailout would look more like Fannie/Freddie Mae than TARP. I can't emphasize how much ill will Banks have in Germany with politicians and the German populace.
« Last Edit: October 01, 2016, 06:48:35 AM by Spekulatius »
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