# Profoundd archive — Epstein Files
# Bates number: EFTA00643874
# Title:        From: Richard Kahn <richardkahn12@gmail.com>
# Dataset:      9
# Pages:        4
# Tags:         epstein, doj, dataset-9
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=== SUMMARY ===
From: Richard Kahn <richardkahn12@gmail.com> To: "jeffrey E." <jeevacation@gmail.com> Subject: Fwd: Derivatives not priced for a bond-equity melt up or tantrum, making hedging cheap Date: Tue, 19 Jul 2016 16:29:42 +0000 Inline-Images: image0OlgifOlD1E1A4D4978140.gif; image009jpg01D1E147FE917C10.jpg; image012jpg01D1E147FE917C10.jpg; image016jpg01D1E147FE917C10.jpg; image028pngOlD1E147FE917C10.png; image004pngOlD1E18AFACCFE90.png in process of setting up account with amanda ens at investment bank


=== EXTRACTED TEXT ===
From: Richard Kahn <richardkahn12@gmail.com> 
To: "jeffrey E." <jeevacation@gmail.com> 
Subject: Fwd: Derivatives not priced for a bond-equity melt up or tantrum, making hedging cheap 
Date: Tue, 19 Jul 2016 16:29:42 +0000 
Inline-Images: image0OlgifOlD1E1A4D4978140.gif; image009jpg01D1E147FE917C10.jpg; 
image012jpg01D1E147FE917C10.jpg; image016jpg01D1E147FE917C10.jpg; 
image028pngOlD1E147FE917C10.png; image004pngOlD1E18AFACCFE90.png 
in process of setting up account with amanda ens at investment bank now 
would you like to see these emails or shall i just have amanda send trade ideas? 
please advise 
thank you 
Richard Kahn 
HBRK Associates Inc. 
575 Lexington Avenue 4th Floor 
New York, NY 10022 
tel 
fa
lce 
Begin forwarded message: 
From: "Ens, Amanda" .1 
Subject: Derivatives not priced for a bond-equity melt up or tantrum, making hedging cheap 
Date: July 19, 2016 at 10:07:27 AM EDT 
To: "Rich Kahn" 
Reply-To: "Ens, 
Highlights from this week's Global Equity Volatility Insights 
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—Long-lerrnUS Treasury torch S&P SOO(*) 
EFTA00643874
Correlation of US 20e YearTreasuries & SPX 
- 
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Tele I: Analys expeacbansitle suptiscson ILS cm. Weil errants Mile eere is I ttk rab pricedinin the epdonmeket vs lise:tical eanings moues 
Ex pected Option Pat 4 31-day Axent 
Report Aug Sep Inplial Eamings Realiad BofAVIL &paie 
Symbol Name Date Vol Vol Move Avg Motos Vol Rating Surprise &ope for Surprise 
4104J no nec, cro immola 314% 3C6§ 27% 196 353% Incleaserm -.pou 'eue bois en CCS7 
OEA AU cewenvi BK '0022215 195'0 '9 5% 10% 08% 210% Bey 
AGI-AU 43. DEMY 'EU ri 7: c% '9 4% 25% 18% 155% "intia 
TLSAU TIELSTRA 110812116 14.6% 14.3% 0.4% 1.5% 152% Bug Dansable Wear cent reineestrrent 
NGNAU NEVCREST 15022016 Kt% 452% 2.8% 4.6% 453% Fity Upside Ume toFTI6Productice 
BNP AU LW LOWTON 1608.0416 328% 36.8% - 2.2% 433% Eltly ibn& Veule on PetioleurnProcbmen 
GSL AU I7S1 1728/2216 205% 203% 1.6% 3.6% 203% Neutra' Douane Mar prame from loner US derme 
QBE Ad Ce '7C.3 2:15 855% 275% 5.1% 23% 353% ederertc-
ASX4u ASX t80&2016 2.5% 184% 04% 1 t% 180% tackeideti—
UPI.AU %%005n *mole 283% 270% 341% 196 287% Etuy 
STDAU 5AN705 19222015 404% 393% 34% 27% 511% Sis ...z.s:, go-met as re-Omon 
FLIGAU FO-TEEC-E W26.2016 592% 57.3% 42% 64% 61.4% Lindeteg:- ._3: 'Deal fuite redt.aoi n CO2 
WESAU WESFnefil =I 24022016 212% 20.7% 1.7% 18% 185% Llilete?:*- :cane DNdend putacx 
WFD AU WE. i- .E... 2408/2016 232% 224% 20% 06% 233% laxissel—:cana Ca.'lldaice ',one tyveak 03P 
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Click for full report 
EFTA00643875
US: Derivatives not priced for a bond-equity melt up or tantrum, making hedging cheap 
• Both US equities and long-dated US Treasuries recently touched all-time highs, with the S&P 500 +7% YTD and TLT (US 20+ Year Treasury 
Bonds) up 16% on a total return basis [Chart 1] 
• Despite this, bond-equity realized correlation remains strongly negative and is near 3yr lows, creating attractive entry points for 
directional long correlation trades (chart 7) 
• For example, a 6M ATM best-of put on SPX & TLT costs'-O.8% (82.5% discount to the average vanilla put) and could serve as a cheap 
hedge against an inflation shock or hawkish reversal in Fed rate hike expectations, both potentially amplified by risk parity unwinds from 
max leverage 
• Alternatively, equity investors who anticipate continued bond outperformance can substantially cheapen longer-dated equity calls via lY 
ATM worst-of calls on SPX & TIT (-0.9%, 83.5% cheaper than a vanilla SPX 1Y ATM call) 
Both US equities and long-dated Treasuries recently hit al-time highs, with However, bond-equity realized correlation has fallen to near 3yr lows as 
YTD total returns of 7% for the S&P and 16% for TLT Treasuries have diversified equities well this year 
Scum Ed4 Ikea linatelaxi Rouse. Curran 31414.:45 Wasp ¶t-Mit Aw retnvolllT and Son BYAVal loth GtOal Resew. Daly <Mka ISJSUltrix91184.1.% US 9). YewnksWsae%Mwfea by TLT 
Sex 
Volatilky of risk parity portfolios has come in this year as cross-asset 
performance has been diversified YTD-as a result, risk parity leverage 
has remained elevated 
Sam eciA ly.0 Odd Rowesh 031/4400 bcci 15.011Stolki*T8 Sam. edA IWO WWI Octineseatt I:J*4406w ISJU-Sh,WWIll 
Europe: Cheap upside in laggard stocks with bearish positioning 
Buy Oct16 -110%F calls on VIE FP STAN LN Al FP  ISE SQ and MUV2 GY for an average price of 2.37%  (ref C19.39 C96.03 C6.02 £6.087 
and f148.7 respectively):
• The 5 names screen as the most attractive candidates based on (table): 
0 Stock underperformance relative to their sector since the Brexit vote: they have lagged their sectors in the post-Brexit vote 
rebound from 27-Jun through 15-Jul 
Cheap calls: YTD percentile of 3M 25d call prices (as of 15-Jul) is low 
0 Bearish stock positioning: short open interest is high vs. other stocks in our list, suggesting the stocks may outperform in a 
potential market squeeze higher. 
• Air Uquide (Al FP) screens inexpensive in our earnings implied move ranking (table in next section) 
• Light exotic implementation:  Oct16 110%F call on an equally wt basket (qEUR) costs 0.81% indic. (correl = 64%), 66% discount vs. avg 
single stock calls 
Top 20 candidates for inexpensive upside potential: Veolia (VIE FP), Standard Chattered (STAN Lk), Al Liquid (Al FP), lberdrola (IBE SO) and Munich Re (MUV2 GY) stand out 
3M Stock Sector Short 3M 25d call Oute4yUnder(-) 25d Underperfomtance Shod Open Option Overall Ticker Sector performanceJun performance performance open ll price (YID rank interest rank price rank rank" 
ca(since 27-) (since 27-Jun) iMerests pementile) 
VIE FP Utlbes (SX6P) 7.1% 11.3% -0.1% 1.3% 1.5% 2.7% 7 38 16 1 
STAN LN Banks (SX7P) 13.1% 10.6% 2.5% 4.5% 2.4% 02% 55 8 5 2 
M FP Cheencas (SX4P1 8.1% 8.8% -0.7% 1.7% 1.4% 02% 35 28 5 3 
IBE SO Ualbes (SX6P) 7.7% 11.3% 4.6% 1.3% 1.3% 3.9% a 39 21 4 
IOUY2 GY Insurance (SAN 3.1% 8.0% -4.9% 1.6% 1.4%14.1% 5 31 37 5 
ANN VX Industret (SXNP) 3.5% IO2% -6.7% 1.2% 1.4% 13.9% 3 II 36 6 
SAND SS Industret (SXNP) 11.9% IO2% 1.7% 5.6% 1.7% 7.1% 52 4 24 7 
ASIA_NA Technobgy (SX8P1 102% 10.6% -0.4% 1.5% 1.7% 0.4% 37 34 9 8 
ITX SO Petal (SXRP) 8.1% 9.5% -1.4% 0.9% 1.5% 0.0% 29 57 1 9 
TSCO LN Nall (SXRP) 7.5% 9.5% -2.1% 6.0% 22% 47.5% 18 2 67 10 
WON GY AuIce (SXAN 13.7% 9.7% 4.0% 3.1% 1.8% 0.6% 61 IS 12 11 
AAL LN Bate Resources (SXPP) 32.1% 202% 11.9% 5.8% 3.3% 0.4% 77 3 9 12 
AGN NA Insurance (S)0P1 -42% 8.0% -122% 3.4% 2.7% 75.0% 1 13 75 13 
ROSA NA CO 8 Gas (SXEN 7.7% 10.7% 4A% 0.6% 1.4% 0.6% 11 66 12 14 
1418 SS Nall (SXRP) 9.7% 9.5% 02% 4.9% 1.5% 16.1% 42 6 41 15 
SAN FP Heath Care (SXDP) 7.4% 7.9% -OS% 1.4% 1.5% 12% 36 36 18 16 
Fat FP Industras (SXNP) 5.4% 102% -4.8% 1.4% 2.0% 19.4% 6 37 47 17 
IF X GY Technobgy (SX8P1 9.8% 10.6% -0.9% 4.4% 22% 19.9% 33 9 48 18 
C6K GY Banks (SX7P) 3.8% 10.6% -6.8% 3.1% 2.9% 73.0% 2 16 73 19 
HPN NA Waxen (SXKP) 7.8% 9.4% -1.7% 4.3% 1.9% 35.8% 23 10 58 20 Sou* Scallicerinfd,GotoiRosorch roan smut) swat cabmen:a on 1tro 21.1a WA 34123doill fats as dIS.U(pron.3 usinpsn3 srcoi4it-to -arm ea NM oi al Wyly veglett a asapol Unicfpritfructo nil 
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lignn Ivalcoescle. M fentrrertabd he conme• ar$ h. con n**Itel cinnstran 0 ctrizies Sc., mini av mtg., Rows 
EFTA00643876
Asia Padflc: Screen for AU stock options to capture earnings surprises 
• Buy TLS, CSL Aug-16 puts to hedge potential earning downside surprise 
• Buy NCM, BHP Aug-16 call spreads to hedge potential earnings upside surprises 
• Indicative pricing (As of 18-Jul-16): 
> Buy Telstra 25-Aug-16 95% puts: 1.05% (iv: 17.1%, -31d) 
> Buy Sic 25-Aug-16 95% puts: 1.09% (iv: 23.3%, -23d) 
➢ Buy Newcrest 25-Aug-16 105/115% call spreads: 2.64% (iv: 46.2%/44.6%, 21d) 
> Buy BHP 25-Aug-16 105/115% call spreads: 2.22% (iv: 35.2%/32.7%, 26d) 
Week in Review: US equity vol has declined towards its lyr lows as the S&P made new highs 
• SPX 1M straddles are currently the most attractive in terms of break-even probability among many global major indices, breaking even 
79% of the time over the past 3 yrs at current pricing (Chart II 
• The current net 'buy-side' positioning as a %-age of net positioning is the most bearish as inferred by e-mini futures since 2010 for 
which the S&P50O hit a relative and/or all-time high at 'Chart 2] 
• Last week, the front end of the VIX futures term structure steepened last week to near its 4yr steepest levels partly due to net vega in 
VIX ETP products grew $34.5 mn over the week (Chart 31 
• The recent post-Brexit rally in US equities coincided with the sharpest flattening in SPX 3m 90-110 skew ever recorded over the past 
10 yrs with the move uniquely driven by call skew [Chart 4] 
1M ATM straddles on the S&P500 screen the most attractive among 
major indices globally, as they would have broken even 92% of the time 
over the past year at current pricing 
Index ILA straddle cosi IV Break-even probability 
Lai I Y Last 2Y Last 3Y 
SPX 2.3% 9.8% 91.8% 81.5% 79.0% 
HSCEI 5.1% 21.1% 87.9% 76.3% 71.9% 
ASS1 3.2% 13.8% 84.4% 701% 61.6% 
HSI 4.2% 17.7% 83.6% 692% 64.0% 
WISE 3.4% 13.2% 83.3% 69.7% 60.5% 
KOSPI2 2.8% 11.9% 78.1% 71.1% 71.6% 
NIFTY 3.4% 14.0% 72.6% 71.6% 73.6% 
NKY 62% 26.2% 71.6% 50.3% 47.0% S&P500 at all-time highs but net 'buy-side' 
positioning still looks bearish 
EFTA00643877