T € A M L ¥ T
TY o u j u $ t g o t L ¥ t t t h e h € l l u p !
Emilien
Mary
Martin
Zacharie
Vincent
Barbeau
Florent
Benhayoun
Tristan
Baronnet
Jeanne
Ledogar

Monetary
Policy
Unemployment
Fiscal Policy
GDP growth
Inflation
Interest rate
IR 
OMOs 
RESTRICTIONARY
Taxes 
GS 
AUSTERITY
5 %
0.20%
0.25 %
2.2%
Hot News
“Economy
Strong Enough
to Handle Rate
Hike”

Monetary
Policy
Unemployment
Fiscal Policy
GDP growth
Inflation
Interest rate
IR 
OMOs 
EXPANSIONARY
Taxes 
GE 
EXPANSIONARY
9.3%
0.10%
0.05%
0.30%
Hot News
QE extended
(not expanded)
= RRR 
GDP growth
Inflation rate
Interest Rate

Monetary
Policy
Unemployment
Fiscal Policy
GDP growth
Inflation
Interest rate
IR 
OMOs 
Taxes 
GE 
4.05%
1.50%
4.35%
1.80%
EXPANSIONARY
EXPANSIONARY
Hot News
Countered
depreciation by
buying yuan and
selling dollars

Listed on the
Services - Online Retail 154,100 employees
Jeff Bezos

Listed on the
Services - Online Retail 16,919 employees
Mr. Ya Shen

AMZN VIPS Industry
Market Cap: $ 246.39B $ 9.61B $ 258.83M
Employees: 154,100 16,919 1,7
Qtrly Rev Growth (yoy): 20.00% 75.00% 34.00%
Revenue (ttm): $ 95.81B $ 4.95B $ 677.84M
Gross Margin (ttm): 31.00% 25.00% 33.00%
EBITDA (ttm): $ 5.73B $ 287.36M $ 2.77M
Operating Margin (ttm): 1.00% 4.00% 0.00%
Net Income (ttm): $ (188.00M) $ 202.42M N/A
EPS (ttm): $ (0.41) $ 0.35 $ (0.12)
P/E (ttm): N/A 47.48 49.34
PEG (5 yr expected): 9.62 0.59 0.63
Quarterly revenue
growth is huge in this
industry. Vipshop is
growing faster than
Amazon  Convergence
Gross Margin is huge in
this industry. Amazon
makes nice cut  great
inventory management.
Vipshop can do better.
Low margins due to
low pricing strategies
and investment in the
future.
Negative NI for Amazon
 investing in the
future. Vipshop NI
positive  importance
given to profitability.
Vipshop is a “cheap” and
undervalued stock while
Amazon is 15 times more
“expensive” than the
industry.

Amazon’s tremendous growth is driven by its investment-in-the-future strategy.
Every penny earned is reinvested into expansionary projects. The growth is also
sustained by Amazon’s organized targeting. Instead of getting too global too
rapidly, Amazon keeps developing four high-growth key segments:
Retail & AmazonFresh
Amazon Web Services
Third-party business (Amazon Marketplace) & Emerging Market (India)
Kindle & Prime

RRR = 0.08% + (8.70% - 0.08%) x 0.73 = 6.37%
ERR1 = 255.60% + 0.00% = 255.60%
ERR2 = 401.90% + 0.00% = 401.90%
ERR3 = 205.70% + 0.00% = 205.70%
RRR = 0.08% + (8.70% - 0.08%) x 1.25 = 10.86%
ERR1 = 58.30% + 0.00% = 58.30%
ERR2 = 75.80% + 0.00% = 75.80%
ERR3 = 48.30% + 0.00% = 48.30%

Return
Risk
Krf = 0.08%
Km = 8.70%
ERR2=401.90%
BUY side
SELL side
RRR=10.86%
ERR3=205.70%
RRR= 4.74%
ERR3=48.30%
ERR2=75.80%
ERR1= 255.60%
ERR1=58.30%
Β=0.73 β=1.25
β=1.00

Amazon beat estimates and what a beat !!
My assumptions happened to be right as the market grew volatile
but too late as results were only reported at the end of the
following week.
Q3 2015 EPS Consensus Surprise
$ 0.17 ($ 0.10) 270%

• China’s economic downturn may hit hard on online retail
service providers.
• Amazon might have reached a peak and is about to plummet.
• The currency war might undermine Amazon’s revenues.
• The Fed raises interest rates and provokes major turmoil in
the markets impacting Amazon.
• Amazon board decides to declare dividends and enters a new
era.

Amazon Inc. Long Position
Our case Best Case Worst Case
Long $ 537.60 $ 537.60 $ 537.60
Sell $ 671.91 $ 682.77 $ 490.50
# of shares 186 186 186
Initial Investment $ 99,993.60 $ 99,993.60 $ 99,993.60
Sold Amount $ 124,975.26 $ 126,995.22 $ 91,233.00
- Comission ($ 20,00) ($ 20,00) ($ 20,00)
+ Dividend - - -
Long on 09/23/15 09/23/15 09/23/15
Sold on 11/30/15 11/23/15 09/29/15
# of days 68 61 6
Total Gain/Loss $ 24,981.66 $ 27,001.62 ($ 8,760.60)
Return % 24.98% 27.00% (8.76%)
Annualized return % 132.26% 159.36% (525.67%)
Actual 52-week
Return %
103.73% 103.73% 103.73%
What drove my investment? :
• The unstoppable growth of the
company and its stock.
• Earnings that beat estimates.
• Amazon Web Services appears to be the
best deal in the industry. Investors have
seen that. Stock up.

Worst Case
$490.50/share
(8.76%) return
09/29/15
Best Case
$682.77/share
27.00% return
11/23/15
Bought
$537.60/share
0.00% return
09/23/15
Sold
$671.91/share
24.98% return
11/30/15

• Headquarter: Irving, Texas
• Sector: Basic Materials
• Industry: Major integrated oil and gas
• Employees: 75,300
• Biggest oil company publicly traded

RRR = 0.10% + (8.70%-0.10%) x 0.93 = 8.10%
ERR1= 4.02% - 46.20% = -42.18%
ERR2= 4.02%+8.10% = 12.12%
RRR = 0.10% + (8.70%-0.10%) x 1.17 = 10.16%
ERR1= 5.51% – 67.30% = -61.79%
ERR2 = 5.51% + 20,80% = 26,31%
http://finance.yahoo.com/q?s=cvx&ql=1
http://finance.yahoo.com/q?s=xom&ql=1

Km = 0.10%
1
Krf = 8.70%
ERR2 = 26.31%
ERR1 = -
61.79%
ERR2 = 12.12%
1.17
RRR = 10.16%
RRR = 8.10%
0.93
ERR1 = -
42.18%
ExxonMobil
Chevron
Hold

Forward P/E > Trailing P/E. This means EPS will fall in the future.
Current EPS = Price/Trailing P/E = $72.71/12.93 = $5.62
Expected EPS = Price/Forward P/E = $72.71/16.97 = $4.28
SHORT
Variation of EPS: (Expected EPS – Actual EPS) / Actual EPS
($4.29-$5.62)/$5.62 = -23.67%
http://finance.yahoo.com/q?s=cvx&ql=1

Bloomberg thinks XOM EPS will fall by 48.64%
 They expect price to fall or P/E to increase
Previous slides: P/E Increase, but analysts expect price to fall.
The increase in P/E is not sufficient to explain a 48.64% decrease in EPS.
http://www.bloomberg.com/visual-data/industries/rank/name:market-cap

STOCKS
Exxon Mobil Short Position
Shorted $72,91 $72,91 $72,91
Covered -$86,26 -$71,72 -$87,44
# of shares -1 375 -1 375 -1 375
Initial Investment $100 251,25 $100 251,25 $100 251,25
Covered Amount -$118 607,50 -$98 615,00 -$120 230,00
- Comission -$10,00 -$10,00 -$10,00
+ Dividend - - -
Shorted on 09/23/15 09/23/15 09/23/15
Covered on 11/03/15 09/24/15 11/03/15
# of days 41 2 41
Total Gain/Loss -$18 356,25 $1 636,25 -$19 978,75
Return % -18,31% 1,63% -19,93%
Annualized return % -160,77% 293,79% -174,98%

Shorted
$72.91
Best
$71.72
Worst
$87.44
Covered
$86.26

ExxonMobil beat Q3 estimates on October 30th
Price of oil keeps decreasing since Jan 15
ExxonMobil released the price of their
dividends for Q4
Exxon positively correlated with the S&P500
0.65

• ExxonMobil Starts Oil Production at Erha North Phase 2 Project Ahead of Schedule
and Well Under Budgethttp://news.exxonmobil.com/press-release/exxonmobil-
starts-oil-production-erha-north-phase-2-project-ahead-schedule-and-well-un
• ExxonMobil signs Agreements to increase position in Permian
Basinhttp://news.exxonmobil.com/press-release/exxonmobil-signs-agreements-
increase-position-permian-basin
• ExxonMobil to Expand U.S Domestic Crude Processing Capacity At Beaumont
Refineryhttp://news.exxonmobil.com/press-release/exxonmobil-expand-us-
domestic-crude-processing-capacity-beaumont-refinery
• ExxonMobil Earns $4.2 Billion in second quarter
2015http://news.exxonmobil.com/press-release/exxonmobil-earns-42-billion-
second-quarter-2015
http://news.exxonmobil.com/

Price of the Stock: $72.71
StockTrak commission $10
Initial Investment: $100,000
Real Investment: $100,000/($72.71/Per share) = 1,375 shares
1,375 shares x ($72.71/Per Share) + $10 = $99,986.25
Order passed when stock was at $72.71, StockTrak bought at $72.91 per share

http://www.investopedia.com/video/play/4-reasons-to-invest-in-etfs/
Includes every assets such as currency, stocks, indexes, etc.Traded all during the dayDifferent style of management: active or passiveNew creation of ETFsLeveraged or inverse ETF

http://www.bloomberg.com/news/articles/2015-09-17/best-etf-bet-this-year-is-shorting-brazilian-shares-two-times
Country’s asset are selling off32 percent decrease of the brazilian realS&P cut Brazil to BB+ ratingDeeper-than-expected economic recessionFailure to shore up fiscal accounts32 percent decrease of the real

ProShares UltraShort MSCI Brazil Capped (BZQ)
The Fund seeks daily investment
results that correspond to twice the
inverse of the daily performance of
the MSCI Brazilian 25/50 Index.
Twice the inverse
Small ETF
http://www.morningstar.com/etfs/ARCX/BZQ/quote.html

No diversification
High risk
High Gain/Loss
1/3
1/5
Medium-sized companies
Averaged volatility
High dividend yield

$100,000 /
$174.16
𝑠ℎ𝑎𝑟𝑒
= 574 shares
574 shares *
$174.16
𝑠ℎ𝑎𝑟𝑒
+ $10 = $99,977.84
Number of
shares
Real Investment

Bought $174,16 $174,16 $174,16
Sold $125,58 $200,63 $112,26
# of shares 574 574 574
Initial Investment -$99 967,84 -$99 967,84 -$99 967,84
Sold Amount $72 082,92 $115 161,62 $64 437,24
+ Dividend - - -
Bought on 09/23/15 09/23/15 09/23/15
Sold on 11/27/15 09/24/15 11/20/15
# of days 65 2 58
Total Gain/Loss -$27 884,92 $15 193,78 -$35 530,60
Return % -27,89% 15,20% -35,54%
Annualized return % -154,49% 2735,76% -220,61%
Bought
Best Case
Worst Case
Sold

BRL appreciated during the following weeks
Corruption scandal
Did not meet their earnings

Definition
“An investment vehicle that is made up of a pool of funds collected from many
investors in order to invest in securities such as stocks, bonds, money market
instruments and similar assets”.

Company overview
66.5 %
3.3%
10.7 %
18.8 %
Regional exposure
North America
Pacific Ex Japan
Europe
Middle East & Africa
Sector diversification
Media
Software
Semiconductors
Miscellaneous
Information Services
Technology
IT Services
Telecom Services
Health Care
• Industry: Technology
• Fund Family: T. Rowe Price
• Founded in: 2000
• Manager : Joshua K. Spencer
• HQ: Baltimore, Maryland
• Traded: NASDAQ
http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=28116059
Major holders

https://en.wikipedia.org/wiki/Treynor_ratio
http://www.investopedia.com/terms/t/treynorratio.asp
http://finance.yahoo.com/news/time-buy-t-rowe-price-110311867.html
Ratio (5yrs) PRGTX BGSAX Industry
Total Assets $2.1B $253.2 M -
Sharpe Ratio 1.29 0.89 0.92
Treynor Ratio 20.54 14.31 14.42
Beta 1.12 0.99 1.01
Expense ratio 0.91% 1.61% -
Competitors
X 1.44 X 1.42
X 1.44 X 1.40
Sharpe ratio
Is the average return earned in excess of the risk-free rate per unit of volatility or total risk. The
closest from 3, the better.
(Mean portfolio return- risk free rate)/SD of the portfolio return
Treynor ratio
Measure returns earned in excess of which could have been earned on a riskless investment per each unit of
market risk
(Average Return of the Portfolio - average return of the Risk-Free rate)/Beta
Expense ratio
Fee paid to a fund's investment manager/advisor, recordkeeping, custodial services,
taxes, legal expenses, accounting and auditing fee.

WHY ?
Industry
Risk
Performance
The average tech fund has gained
9.86 % a year over the 10 past years
vs. 7.99% for the S&P500 index
Technology stocks are considered
more volatile
2014
Return:
20.77%
2014
Return:
18.03 %
Beta:1.
12
Risk:
HIGH
Fees:
0.91%
LOW
Beta:
0.99
Risk :
AVERAGE
Fees:
1.61%
HIGH
http://data.cnbc.com/quotes/BGSAX/tab/4
http://money.usnews.com/funds/mutual-funds/technology/blackrock-science-%26-technology-opportunities-portfolio/bgsax/performance

What Happened ??
http://www.cnbc.com
http://seekingalpha.com
• Slump in
biotech
stocks
• Weak data
out of China
• VRX impact
Tech sector
more likely to
report above
par earnings
Hillary
Clinton
declaration
“Price of
drugs is too
high “
Gravitational
pull of the
Fed
Tech sector
impressed
with Q3
earnings
Positive
economic
report ahead
of
Thanksgiving

• Headquarter: Dallas, Texas
• Sector: Industrials
• Industry: Airlines
• Employees: 47, 645

http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=LUV&Country=U
SA
http://www.standardandpoors.com/spf/general/RatingsDirect_Commentary_9792
12_06_22_2012_12_42_54.pdf
Morningstar rating:
Good debt
capacity

http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=LUV&Country=USA
Lower than industry
Debts & Coverage Ratios better than the Industry

Annual Coupon payment
Price
$100, 000 Investment/ $1038.60 = 94 bonds
Annual interest + Par value – Price
Years to maturity
Par value + Price
2
Yield
Yield to maturity
Number of bonds
bought
Bond
Company Name Coupon rate
Maturity
date
Maturity in
years
Par value
Annual
Coupon’s
payment
Price Yield
Yield to
Maturity
Number of
bonds
bought
SouthWest Airlines 9,150% 1-Jul-2016 1 1000 $ 91,50 $ 1 038,60 8,810% 5,190% 94

Price > Par Value = Premium
$1, 038.60 > $1, 000 = Premium
Premium
SouthWest Airlines bond: $1, 038.60
Par value: $1, 000
Company Name Coupon rate
Maturity
date
Maturity in
years
Par value
Annual
Coupon’s
payment
Price Yield
Yield to
Maturity
Number of
bonds
bought
SouthWest Airlines 9,150% 1-Jul-2016 1 1000 $ 91,50 $ 1 038,60 8,810% 5,190% 94

SouthWest Airline bond YTM = 5.190%
US T-Note YTM = 0.318%
5.190% – 0.318% = 4.87%
487 Basis points
U.S Treasury bond VS Corporate bond
http://screener.finance.yahoo.com/z2?ce=4915552143561496916156&q=b%3d2%26cpl%3d-
1.000000%26cpu%3d-1.000000%26mtl%3d6%26mtu%3d12%26pr%3d0%26rl%3d-1%26ru%3d-
1%26sf%3dm%26so%3da%26stt%3d-%26tt%3d1%26yl%3d-1.000000%26ytl%3d-1.000000%26ytu%3d-
1.000000%26yu%3d-1.000000

Interest that has been earned
but not yet paid since last
payment day
Coupon Rate X Face Value Days
Payment frequency Days in payment period
X

Bond Price $1 038,60 $1 038,60 $1 038,60
Sold $1 038,60 $1 038,60 $1 038,60
# of bond 94 94 94
Initial Investment -$99 560,68 -$99 560,68 -$99 560,68
Sold Amount $100 927,41 $101 470,25 $99 560,68
+ Accrued Interest $1 366,73 $1 909,57 -
Bought on 23/09/2015 09/23/15 09/23/15
Sold on 11/20/15 01/07/16 09/23/15
# of days 58 104 1
Total Gain/Loss $1 366,73 $1 909,57 $0,00
Return % 1,37% 1,92% 0,00%
Annualized return % 8,52% 6,64% 0,00%

Source: Eikon as of 9/30/15. Reflects most recent data available. Credit ratings by
Standard & Poor's.
Emerging markets:
High yield because of
uncertain economic
conditions.
China: uncertain growth
Brazil & Russia: Recession

Date 1 mo 6 mo 2 yr 5 yr 10 yr 30 yr
12/04/15 0,17% 0,49% 0,96% 1,71% 2,28% 3,01%
Δ bps 17 40 29 27 15 10
09/24/15 0,00% 0,09% 0,67% 1,44% 2,13% 2,91%
Δ bps -1 6 8 -38 -44 -37
09/24/14 0,01% 0,03% 0,59% 1,82% 2,57% 3,28%
Δ bps -1 -2 24 38 -10 -39
09/24/13 0,02% 0,05% 0,35% 1,44% 2,67% 3,67%
Δ bps -1 -9 8 76 93 76
09/24/12 0,03% 0,14% 0,27% 0,68% 1,74% 2,91%
Δ bps 3 12 4 -21 -10 2
09/23/11 0,00% 0,02% 0,23% 0,89% 1,84% 2,89%
Δ bps -9 -17 -22 -48 -78 -90
09/24/10 0,09% 0,19% 0,45% 1,37% 2,62% 3,79%
Δ bps 6 0 -48 -100 -78 -38
09/24/09 0,03% 0,19% 0,93% 2,37% 3,40% 4,17%
Δ bps -10 -126 -110 -54 -40 -23
09/24/08 0,13% 1,45% 2,03% 2,91% 3,80% 4,40%
Δ bps -322 -266 -202 -140 -83 -48
09/24/07 3,35% 4,11% 4,05% 4,31% 4,63% 4,88%
Δ bps -137 -90 -58 -20 7 18
09/25/06 4,72% 5,01% 4,63% 4,51% 4,56% 4,70%
Flat Yield
Curve
Normal
Yield Curve
0
1
2
3
4
5
6
1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
Yield(%)
Maturity
Treasury Yield curve - 2006 to 2015
09/25/06
09/24/15
-472 Bps
-169 Bps
0
1
2
3
4
5
6
Yield(%)
Maturity
Treasury Yield curve - 2006 to 2015
09/24/15
09/24/13
09/24/12
09/24/09
09/24/08
09/25/06
1
2
3
4
5

Calculation
Time to Maturity 28
Payment Frequency 2
Payment - Pmt 18,75$
Yield to Maturity - YTM 2,85%
Last Pmt 5/15/15
# of days since last pmt - Seller 129
Total Accrued Interest - Seller 1195,94$
Last Pmt 11/15/15
# of days since last pmt - Buyer 15
Total Accrued Interest - Buyer 69,53$
Current Yield 3,20%
Capital gain Yield -14,70%
Total Yield -11,50%
Summary:
Price at issuing date 989,33$
Face Value - FV 1 000,00$
Value of Bond - PV 1 172,34$
Interest Rate 3,750%
Maturity Date 15-Nov-2043
# of bonds 89
First Coupon Payment 15-mai-14
Type Treasury Bond
Coupon Payment Frequency Semi-Annual
Callable No
Offering information:
Minimum trade quantity 1
Issue Date 11/15/13
Settlement date 9/24/15
Maturity Date 11/15/43
# of years 30
# of year since issue 2
$ 989.33 Sell at a discount price
$ 1,172.34 P IRPV
FV $ 1,000.00
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
Yield(%)
Maturity
Yield curve 2013 - 2015
09/24/13
09/24/15

Pmt:
Current Yield:
$18.75 x 2
2
$1,000.00 x 3.75%
=$18.75
3.20% =
$1,172.34
YTM:
2 28 ? -1,172.34 18.75 1,000.00
P/Yr N I/Y PV PMT FV
2.85%
24-Sept-2015
PV: $1,172.34
Current Yield: 3.20%
15-Nov-2043
FV: 1,000.00$
YTM: 2.85%
Payment: May & Nov.
$18.75
Total Accrued Interest:
$1,000.00 x 3.75% x 129 days x 89 bonds
360 days
=$1,195.94
Investment:
$105,534.55 = $1,172.34x 89bonds + $1,195.94

Best
$1190,08
Worst
$1132,81
Sold
$1154,38
Bought
$1172,34

Our case Best Case Worst Case Stocktrack
Buy 1 172,34$ 1 172,34$ 1 172,34$ 1 114,00$
Sell 1 154,38$ 1 190,08$ 1 132,81$ 1 114,00$
GP/bond (17,97)$ 17,73$ (39,53)$ -$
# of bond 89 89 89 89
GP 104 556,46$ 107 196,32$ 102 470,57$ 100 870,38$
Investment 105 534,55$ 105 534,55$ 105 534,55$ 100 341,94$
NP (978)$ 1 662$ (3 064)$ 528$
ROI -0,93% 1,57% -2,90% 0,53%
Buy on 09/24/15 09/24/15 09/24/15 09/24/15
Sell on 11/30/15 10/02/15 11/12/15 11/20/15
# of days 67 9 49 57
Last Pmt 11/15/15 5/15/15 5/15/15 11/15/15
# of days since last pmt - Buyer 15 137 177 5
Total Accrued Interest - Buyer 621,15$ 83,44$ 454,27$ 528,44$

“A growing majority of
economists surveyed by
Bloomberg are calling for a
December Federal Reserve
rate hike after officials
bypassed it at their September
meeting.”
Source: blomberg.com

CALL OPTION
BUYER______
• HAS THE RIGHT TO BUY A STOCK,
CURRENCY OR INDEX AT THE
EXERCISE PRICE
• PAYS THE SELLER AN OPTION
PREMIUM
• BELIEVES THE UNDERLYING
ASSET WILL BE HIGHER IN VALUE
THAN THE BREAKEVEN PRICE
SELLER______
• HAS THE OBLIGATION TO SELL A
STOCK, CURRENCY OR INDEX AT
THE EXERCISE PRICE
• RECEIVES FROM THE BUYER AN
OPTION PREMIUM
ASSET WILL BE LOWER IN VALUE
BREAKEVEN PRICE=EXERCISE PRICE + OPTION PREMIUM

PUT OPTION
BUYER______
• HAS THE RIGHT TO SELL A
STOCK, CURRENCY OR INDEX AT
THE EXERCISE PRICE
• PAYS THE SELLER AN OPTION
PREMIUM
ASSET WILL BE LOWER IN VALUE
SELLER______
• HAS THE OBLIGATION TO BUY
A STOCK, CURRENCY OR
INDEX AT THE EXERCISE
PRICE
• RECEIVES FROM THE BUYER
AN OPTION PREMIUM
ASSET WILL BE HIGHER IN
VALUE THAN THE BREAKEVEN
PRICE
BREAKEVEN PRICE=EXERCISE PRICE-OPTION PREMIUM

CALL PUT
Right to buy a man
you paid an option
premium to adopt un
mec
Believe the value of the
man will increase
Adopt him today, you
sell him back when his
price will be higher
Right to sell a man
Before going on the date, you
paid an option premium
Believe the value of the man
will decrease
Adopt him today, you sell him
back at the exercice price
even if his value is lower
than when you adopted him

YUM 00080C1009 00015
Root
(ticker for Yum! Brands Inc.)
Year of expiration (2015)
Month and Day of expiration
(October 09th) Call (C) or Put (P)
Strike Price ($80)
Strike Price
fraction of
Dollars (N/A)
YUM 00092C0115 50016
Root
(ticker for Yum! Brands Inc.)
Year of expiration (2016)
Month and Day of expiration
(January 15th) Call (C) or Put (P)
Strike Price ($92)
Strike Price
fraction of
Dollars ($0.5)

- World’s
largest
pizza
company
- 13.600
restaurants
- 85
countries
- ♯1 chicken
restaurant
chain
- 14.200
restaurants
- 115
countries
- ♯1
Mexican-
style U.S.
fast food
- 6.000
restaurants
- 20
countries
“We are
opening on
average over
five new
restaurants
per day
outside the
U.S. in 2014.”
Yum! Restaurants
China
Yum! Restaurants
India
Headquarters Louisville. Kentucky
♯ of restaurants 41,000
Presence 125 countries
Fortune 500 rank ♯228
♯ of associates 1.5 million
Revenue
$ 13.28B
(2014)
Net Income
$ 1.05B
(2014)
David C. Novak
Director
Greg Creed
CEO
- 6.800
restaurants
- +1.000 cities
- Opening 700
extra in 2015
- 600 million
customers target
- 571 restaurants
- 2020: 2.000
restaurants
- India to become
the biggest
consumer class
in the world

YUM MCD SBUX CMG Industry
Market Cap: $ 34.44B $ 93.03B $ 85.31B $ 22.56B $ 935.52M
Employees: 69,810 420,000 191,000 53,090 6,100
Qtrly Rev Growth (yoy): (3.00 %) (10.00 %) 18.00 % 14.00 % 9.00 %
Revenue (ttm): $ 13.08B $ 26.02B $ 18.43B $ 4.44B $ 435.76M
Gross Margin (ttm): 26.00 % 38.00 % 31.00 % 38.00 % 31.00 %
EBITDA (ttm): $ 2.70B $ 9.03B $ 4.13B $ 950.72M $ 63.68M
Operating Margin (ttm): 15.00 % 29.00 % 18.00 % 19.00 % 8.00 %
Net Income (ttm): $ 915.00M $ 4.18B $ 2.69B $ 514.88M N/A
EPS (ttm): $ 2.04 $ 4.30 $ 1.78 $ 16.33 $ 0.65
P/E (ttm): 39.13 22.98 32.38 44.37 25.29
PEG (5 yr expected): 1.96 3.15 1.99 1.86 1.57
Yum! And McDonald’s are
facing difficulties especially
with China. Starbucks and
Chipotle continue climbing.McDonald’s and Chipotle
seem to have efficient COGS
management, which is not the
case for Yum! (5% less GM
than industry).McDonald’s has an OM twice
as big as Yum’s OM  better
pricing strategy / operating
efficiency at MCD. Yum! Still
2x better than industry.
As competitors make at least
10% ROS, Yum! stands at 7%,
which points out its lack of
profitability.
PEG confirms Yum! Stock
more desirable even if stock
seems not to be undervalued.
MCD is 2x more “expensive”
than the industry.

• I am taking this option on a very short term basis because I believe the underlying
asset will rise in value just after the company releases its earnings. I will then take
advantage of the high volatility to close my call at a potential peak.
• My Call Buy strike price was out of the money at the opening of the Call making this
trade a risky investment so that it would be in line with our strategy.
• I sold a call at a very high strike price of $92.50 in case the rise is too violent or if it
turns out that Yum! Brands missed earnings estimates. That way I could make double
money or recuperate the option premium if my gut feelings were wrong.
EPS Consensus Forecast EPS Previous Year
$ 1.07 $ 0.87
Q3 2015 EPS Surprise
$ 1.00 (6.54%)
Nasdaq.com
Past two quarters have
had positive high surprise
rates (≈10%). If it
happened again it would
stimulate volatility.

Double Death Cross
followed by a 3-
months bear market.
Quick
Golden Cross
followed by
Death Cross.
Return of a bull
market?
I bet on it.
Uncertainty finally
followed by a bull
market.
Stabilization as the
stock sets a floor.
Followed by a great
bull market period of
3-months.

Volatility
falls. stocks
overbought
Volatility
rises. stocks
underbought
Volatility
falls. stocks
overbought
Volatility
rises. stocks
underbought
Volatility
rises. stocks
underbought

Perfect time to Buy or Short.
Too late. Everyone made the trades. Stock is overbought.
Too late. Everyone made the trades. Stock is oversold.

I had the right to buy Yum! Brands at the exercise price of
$80.00.
Since I bought the call, I had to pay the seller an option
premium of $2.4601 per share.
I assumed that Yum! Brands’ stock price would rise above the
breakeven price of $82.4601 before the call’s expiration on
October 10th, 2015.

Delta = 0.4918
1% x $79.58 = $0.7958
New Stock Price: $80.3758
A 1% increase in the stock price
will drive the option price to rise by $0.4918
$2.4601  New Option Price
+ $0.4918 = $2.9519
Theta = -0.1662
What will happen to the Option Price in 24 hours?
If all held constant. in a day's time
the Option Price will fall by 16.62%
New Option Price:
(1+ x $2.4601 ↵
-0.1662 ) = $2.0512
Volatility: 56.53%
Vega = 0.0470
0.5653 + 1% = 57.53%
0.5653 - 1% = 55.53%
If the stock's volatility increases by 1%
the Option Price will rise by 4.70%
(1+ x $2.4601
New Option
Price
0.0470 ) = $2.5757
Interest Rate: 0.1930%
Rho = 0.0080
0.00193 + 1% = 1.19%
0.00193 - 1% = -0.81%
If interest rates increase by 1%
the option price would increase by 0.80%
(1+ x $2.4601
New Option
Price
0.0080 ) = $2.4798

Actual Price $79.58
Exercise Price $80.00
Option Price $2.4601
Breakeven Price $82.4601
*Contract: $2.4601 x 100 = $246.01
Option Price / Share Shares / Contract Option Price Per Contract
*Contracts: $10,100.00 / $246.01 = 41
Initial Investment Option Price per Contract Number of Contracts
Investment: 41 x $246.01 = $10,086.41
Number of Contracts Option Price per Contract Total Investment
Leverage:
♯ of Shares - OM 41 x 100 = 4,100
Number of Contracts Shares / Contract Total ♯ of Shares - OM
♯ of Shares - SM $10,086.41 / $79.58 = 126
Total Investment Actual Price Total ♯ of Shares - SM
Leverage = 4,100 / 126 = 33x
Total ♯ of Shares - OM Total ♯ of Shares - SM Leverage Ratio

-16000
-12000
-8000
-4000
0
4000
8000
12000
16000
20000
24000
28000
32000
36000
40000
75.00 76.00 77.00 78.00 79.00 80.00 81.00 82.00 83.00 84.00 85.00 86.00 87.00 88.00 89.00 90.00
Closing Spot Rate
YUM Call Buy at $80.00 Graph
G
A
I
N
L
0
S
S
OUT OF THE MONEY IN THE MONEY
AT THE MONEY
BEEP
Max Loss = ($10,086.41)

I had the obligation to sell Yum! Brands at the exercise price of
$92.50.
Since I sold the call, I received from the buyer an option
premium of $1.3303 per share.
I assumed that Yum! Brands’ stock price would stay below the
breakeven price of $93.8303 before the call’s expiration on
January 15th, 2016.

Delta = 0.1984
1% x $79.87 = $0.7987
New Stock Price: $80.6687
A 1% increase in the stock price
will drive the option price to rise by $0.1984
$1.3303  New Option Price
+ $0.1984 = $1.5287
Theta = -0.0174
What will happen to the Option Price in 24 hours?
If all held constant. in a day's time
the Option Price will fall by 1.74%
New Option Price:
(1+ x $1.3303 ↵
-0.0174 ) = $1.3071
Volatility: 30.36%
Vega = 0.1198
0.3036 + 1% = 31.36%
0.3036 - 1% = 29.36%
If the stock's volatility increases by 1%
the Option Price will rise by 11.98%
(1+ x $1.3303
New Option
Price
0.1198 ) = $1.4897
Interest Rate: 0.3205%
Rho = 0.0425
0.003205 + 1% = 1.32%
0.003205 - 1% = -0.68%
If interest rates increase by 1%
the option price would increase by 4.25%
(1+ x $1.3303
New Option
Price
0.0425 ) = $1.3868

Actual Price $79.87
Exercise Price $92.50
Option Price $1.3303
Breakeven Price $93.8303
*Contract: $1.3303 x 100 = $133.03
Option Price / Share Shares / Contract Option Price Per Contract
*Contracts: $5,454.23 / $133.03 = 41
Initial Investment Option Price per Contract Number of Contracts
Investment: 41 x $133.03 = $5,454.23
Number of Contracts Option Price per Contract Total Investment
Leverage:
♯ of Shares - OM 41 x 100 = 4,100
Number of Contracts Shares / Contract Total ♯ of Shares - OM
♯ of Shares - SM $5,454.23 / $79.87 = 68
Total Investment Actual Price Total ♯ of Shares - SM
Leverage = 4,100 / 68 = 60x
Total ♯ of Shares - OM Total ♯ of Shares - SM Leverage Ratio

-36000
-33000
-30000
-27000
-24000
-21000
-18000
-15000
-12000
-9000
-6000
-3000
0
3000
6000
9000
12000
15000
18000
87.5 88.5 89.5 90.5 91.5 92.5 93.5 94.5 95.5 96.5 97.5 98.5 99.5 100.5 101.5 102.5
Closing Spot Rate
YUM Call Sell at $92.50 Graph
AT THE MONEY
IN THE MONEY
EP
BE
G
A
I
N
L
0
S
S
OUT OF THE MONEY
Max Gain = $5,454.23

-20000
-10000
0
10000
20000
30000
40000
50000
60000
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100
YUM Bull Call Spread
Max Loss = ($4,632.18)
EP
EP Sold
Call
BE1
BE2
Max Gain =
$46,617.82
Out of the money Out of the moneyIn the moneyAt the money At the money
Closing Spot Rate
G
A
I
N
L
0
S
S

Yum Brands: Bull Call Spread
Call Bought Call Sold
Option Symbol YUM151009C00080000 YUM160115C00092500
Stock Price $ 79.58 $ 79.87
Exercise Price $ 80.00 $ 92.50
Option price per share $ 2.4601 $ 1.3303
Number of shares per contract 100 100
Option price per contract $ 246.01 $ 133.03
Breakeven Price $ 82.4601 $ 93.8303
Number of contracts 41 41
Investment $ 10,086.41 $ 5,454.23
Leverage 33 60
Bought on / Sold on 10/1/15 10/2/15
Not Exercized but sold on 10/7/15 10/7/15
At the price of $ 0.01 $ 0.23
Change in price ($ 2.45) ($ 1.10)
Gain/Loss ($ 10,086.41) $ 5,454.23
Commission ($ 20.00) ($ 20,00)
Total Gain/Loss ($ 10,086.41) $ 5,454.23
Return (100.00%) 100.00%
Gain / Loss ($ 10,086.41) $ 5,454.23
Days 7 6
Annualized Return (5,142.86%) 6,000.00%
TOTAL GAIN/LOSS ($ 4,632.18)
• Figures on Yum! expansion abroad
• Earnings that missed estimates.
• China’ situation getting worse.

Call Bought
EP=$80.00
OP=$2.4601
10/01/15
Actual Price
Buy Call
$79.58
10/01/15
Call Sold
EP=$92.50
OP=$1.3303
10/02/15
Actual Price
Sell Call
$79.87
10/02/15

BULL PUT SPREAD
Valeant Pharmaceuticals International (VRX)

1960 J. Michael
Pearson
17,000
employees
Laval
$8.3B
http://www.valeant.com/
New-York
Stock
Exchange
VRX

Valeant confirms to buy Sprout Pharmaceuticals for about $1 billionValeant Pharmaceuticals' stock gains 0.6% after merger deal with
Synergetics
Valeant boosts guidance after strong quarter

Current month Grade
Strong buy 1 5 5
Buy 2 12 24
Hold 3 2 6
Underperform 4 1 4
Sell 5 0 0
Total 20 1.95
Three months ago Grade
Strong buy 1 5 5
Buy 2 12 24
Hold 3 2 6
Underperform 4 1 4
Sell 5 0 0
Total 20 1.95
http://finance.yahoo.com/q/ao?s=VRX+Analyst+Opinion

Oversold
Short term: Demand  Price 
Long term: Price rose
Overbought
Short term : Demand  Price 
Long term : Price fell
https://www.barchart.com/chart.php?sym=VRX&style=technical&template

Middle moving average
Fast moving average
Slow moving average
Buy signal
FMA > MMA > SMA
Sell signal
FMA < MMA < SMA

Volatility decreases
Volatility increases
Stock Price should
tend to increase

VRX1520W175
VRX1520W190
COMPANY QUOTE
Expiration Date:
November, 20th 2015
EXERCISE PRICE

Actual Price: $178.38
Option Price: $18.30
Strike: $175
Intrinsic Value: Out of the money => No intrinsic value
Time Value: $18.30
1% X $178.38 =$1.7838
New stock price =$180.16
1% increase in the stock
price, will drive the option
price to fall by $0.4204
Therefore,
New option price:
$18.30 - $0.4204 = $17.88
64.52% + 1% = 65.52%
64.52 % - 1% = 63.52 %
If the stock’s volatility rise
by 1%, the option price
will rise by 25.89%
Therefore:
New option price:
$18.30 x(1+0.2589)=
$23.04
THETA: -0.1667
In 24 hours, what about
Valeant option price?
If all held constant, in one
day the option price will
fall by 16.67%
Therefore,
New option price:
$18.30 x (1-0.1667)=
$15.25
RHO: -0.1115
In 24 hours, what about Valeant
option price?
If all held constant, in one day
the option price will fall by
11.15%
Therefore,
New option price:
$18.30 x (1-0.1115)= $16.26
Buy Put

Actual Price: $178.38
Option Price: $24.40
Strike: $190
Intrinsic Value: 190-178.38= $11.61
Time Value: 24.40-11.61= $12.79
1% X $178.38 =$1.7838
New stock price =$180.16
1% increase in the stock
price, will drive the option
price to fall by $0.5616
Therefore,
New option price:
$24.40 - $0.5616 = $23.83
62.69% + 1% = 63.69%
62.69% - 1% = 61.69%
If the stock’s volatility rise
by 1%, the option price
will rise by 26.20%
Therefore:
New option price:
$24.40 x (1+0.2620) =
$30.79
THETA: -0.1631
In 24 hours, what about
Valeant option price?
If all held constant, in one
day the option price will
fall by 16.31%
Therefore,
New option price:
$24.40 x (1-0.1631)=
$20.42
RHO: -0.1476
In 24 hours, what about Valeant
option price?
If all held constant, in one day
the option price will fall by
14.76%
Therefore,
New option price:
$24.40 x (1-0.1476)= $20.79
Sell Put

Price per
contract
100 shares
x
$18,30
=
$1 830,00
Contract Share Contract
Number of
Contracts
$9 150
÷
$1 830
=
4
Money to invest Contract contracts
Initial
Investment
4
x
$1 830,00
=
$7 320,00
contracts Contract Initial Investment
Price per
contract
100 shares
x
$24,40
=
$2 440,00
Number of
Contracts
$9 760
÷
$2 440
=
4
Initial
Investment
4
x
$2 440,00
=
$9 760,00
Buy Put
Sell Put

Stock
Market
$7 320,00
÷
178,38
=
41
Initial Investment Share shares
Option
Market
4
x
100 shares
=
400
Contracts Contract shares
Leverage
400
÷
41
= 9,75
shares shares
Buy Put
Stock
Market
$9 760,00
÷
178,38
=
55
Option
Market
4
x
100 shares
=
400
Leverage
400
÷
55
= 7,27
shares shares
Sell Put

Max Loss = -$7,320 Max Gain = $62,680
-$10 000.00
-$8 000.00
-$6 000.00
-$4 000.00
-$2 000.00
$ 0.00
$2 000.00
$4 000.00
$6 000.00
$8 000.00
$10 000.00
$12 000.00
130 135 140 145 150 155 160 165 170 175 180 185 190 195 200 205 210 215 220
Buy Put
G
A
I
N
L
O
S
S
IN THE MONEY
EXERCISE POSSIBLE
OUT OF THE MONEY
NO EXERCISE
AT THE MONEY
$156.7
$175

-$20,000.00
-$15,000.00
-$10,000.00
-$5,000.00
$0.00
$5,000.00
$10,000.00
$15,000.00
130 135 140 145 150 155 160 165 170 175 180 185 190 195 200 205 210 215 220
Sell Put
OUT OF THE MONEY
NO EXERCISE
IN THE MONEY
EXERCISE POSSIBLE
AT THE MONEY
G
A
I
N
L
O
S
S
$190
$165.6
Max Loss = -$66,240 Max Gain = $9,760

Max Loss = -$3,560 Max Gain = $2,440
-$20 000.00
-$15 000.00
-$10 000.00
-$5 000.00
$ 0.00
$5 000.00
$10 000.00
$15 000.00
130 135 140 145 150 155 160 165 170 175 180 185 190 195 200 205 210 215 220
G
A
I
N
L
O
S
S
$190
$175

Buy Put Option Sell Put Option
Symbol VRX1520W175 Symbol VRX1520W190
Valeant (VRX) Our Case Valeant (VRX) Our Case
Stock Price $ 178,38 Stock Price $ 178,38
Exercise Price $ 175,00 Exercise Price $ 190,00
Option price per share $ 18,30 Option price per share $ 24,40
Number of shares per contract 100 Number of shares per contract 100
Option price per contract $ 1 830,00 Option price per contract $ 2 440,00
Breakeven Price $ 156,70 Breakeven Price $ 165,60
Number of contracts 4 Number of contracts 4
Investment $ 7 320,00 Investment $ 9 760,00
Leverage 9,75 Leverage 7,31
Bought on 10/1/15 Sold on 10/1/15
Sold on 10/20/16 Did not sell, so expire date 10/20/15
At the price of $ 25,53 At the price of $ 99,00
Change in price $ 7,23 Change in price $ 74,60
Gain/Loss $ 10 212,00 Gain/Loss $ -39 600,00
Total Gain/Loss $ 10 212,00 Total Gain/Loss $ -39 600,00
Return 139,51% Return -405,74%
Loss $ 10 212,00 Loss $ -39 600,00
Days 379,00 Days 19,00
Annualized Return 132,51% Annualized Return -7687,66%
TOTAL GAIN/LOSS $ -29 388,00

-40%
 VRX has been scrutinized by lawmakers for pushing up the prices of heart drugs Isuprel and
Nitropress
 Accused of acquiring drug makers and then jacking up the prices of their products, which
have been on the market for years
 Accused of an Enron-like strategy of recording fake sales by using phony customers.

I have the right
to buy at the
exercise price of
$30
I am required to
pay an option
premium to the
seller of $0.72
I think the
underlying asset
will be lower in
value than the
breakeven price
of $29.28

I have the
obligation to sell
at the exercise
price of $28.50
I am required to
receive an
option premium
from the buyer
of $0.30
I think the
underlying asset
will be higher in
value than the
breakeven of
$28.80

Semi-conductor devices
http://www.bloomberg.com/visual-data/industries/detail/metals+mining
Biggest market cap
Ranked 2nd in the
industry in sales

• Creation: 1968
• Headquarter: Santa Clara, CA
• Sector: Technology
• Industry: Semi-conductor devices
• Employees: 106, 700
http://www.bloomberg.com/visual-data/industries/detail/metals+mining
http://finance.yahoo.com/q/pr?s=AA+Profile

http://finance.yahoo.com/q/ao?s=AA+Analyst+Opinion
Grade:
2.88%
decrease
2.53 2.54
Worth
1
2
3
4
5
X
X
X
X
X
119/47117/46
BUY/HOLD BUY/HOLD

• Stocks Pare Losses but Tech Sector Continues
Falling
• Intel (INTC) Stock is the 'Chart of the Day
http://www.thestreet.com/story/13309262/1/stocks-extend-losses-after-manufacturing-slows.html?puc=yahoo&cm_ven=YAHOO
http://www.thestreet.com/story/13309307/1/intel-intc-stock-is-the-chart-of-the-day.html?puc=yahoo&cm_ven=YAHOO
http://www.cnbc.com/2015/09/30/semiconductor-stocks-are-hitting-a-key-decision-
point.html?__source=yahoo%7Cfinance%7Cheadline%7Cheadline%7Cstory&par=yahoo&doc=103040874

INTC1516V29.5INTC1516V28
Company
symbol
Expiration date
Exercise price
Company
symbol
Expiration date
Exercise price

Volatility
increases
Volatility
decreases
https://www.barchart.com/chart.php?sym=INTC&style=technical&template

Buy signal
Sell signal
Price<FMA<MMA<SMA
Price>FMA>MMA>SMA

Overbought Oversold

Delta: <0.4856>
Theta: <0.0302>
Vega: 0.0234
Rho: <0.0039>
New option price: $0.72 – $0.4856 = $0.33
New option price: $0.72 X (1-0.0302)=$0.70
New option price: $0.72 X (1+0.0234)=$0.74

Delta: <0.2718>
Theta: <0.0281>
Vega: 0.0196
Rho: <0.0031>
New option price: $0.30 – $0.2718 = $0.03
New option price: $0.30 X (1+0.0196)=$0.31

$0.72 x 100 shares = $72 per contract
Breakeven point:
Exercise price – option premium
$30 - $0.72 = $28.28
$0.3 x 100 shares = $30 per contract
Breakeven point:
Exercise price - option premium
$28.5 + $0.3 = $28.20
Number of contracts
113 contracts
Investment: $8, 136
Same amount of contracts: 113
113 contracts $3, 390
Investment: $3, 390

113 contracts = 11, 300 shares
$8, 136/ 29.81 per share = 282 shares
11, 300shares / 282 shares = 40.07x
113 contracts = 11, 300 shares
$3, 390/ 29.81 per share = 117 shares
11, 300 shares / 117 shares = 96.58x

-16,000
-14,000
-12,000
-10,000
-8,000
-6,000
-4,000
-2,000
-
2,000
4,000
6,000
27 27.5 28 28.5 29 29.5 30 30.5 31 31.5 32 32.5 33 33.5 34 34.5 35
Sell Put
In the money
At the money
Out the money
$28.20
$28.5
G
A
I
N
L
O
S
S

-10,000.00
-5,000.00
-
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
27 27.5 28 28.5 29 29.5 30 30.5 31 31.5 32 32.5 33 33.5 34 34.5 35
Buy Put
In the money
At the money
Out the money
$28.28
$30
G
A
I
N
L
O
S
S

-20,000
-15,000
-10,000
-5,000
-
5,000
10,000
15,000
20,000
25,000
30,000
27 27.5 28 28.5 29 29.5 30 30.5 31 31.5 32 32.5 33 33.5 34 34.5 35
Sell Put Buy Put Total
$28.28
$30
$28.20
$28.5
G
A
I
N
L
O
S
S
Max gain $12, 204 Max loss $4, 746

Intel sales 3D
physics business to
Microsoft
Intel reports that
profit have tumbled
6.3%
Target price raised
by RBC capital
market

Bank of America
Straddle Strategy
Florent Benhayoun

STRADDLE STRATEGY
Same strike prices
Same maturity
Same underlying asset
Profitable only if large
movements of the
underlying asset
More expensive than a
strangle because one
contract is bought in the
money
A call and a put

Beta = 1.80
Beta>Industry
Stock is more volatile
than the industry
Beta = 1.77
Beta>Industry
Stock is more volatile
than the industry
Beta = 1.46
Beta>S&P
The Industry is very
volatile compare to the
market
Industry

Straddle Strategy:
• We are looking for significant changes in stock price after Earnings
announcement.
• We need a very high/low % surprise.
Q3 2014 Earnings
announcement Q4 2014 Earnings
announcement
Q1 2015 Earnings
announcement
Q2 2015 Earnings
announcement
Devaluation of the
Chinese Yuan

Long run Sell Signal:
Price<SMA(20)<SMA(50)

Call Option
BAC1516J15
Bank of America Strike Price = $15
Expiration date: October, 16th
2015
Put Option
BAC1516V15

100 shares 0,70$ 70,00$
Share Contract
70,00$ 142
Contract contracts
70,00$ 9 940,00$
Contract Initial Investment
15,36$ 647
Share shares
100 shares 14 200
Contract shares
647
shares in SM
Initial
Investment
x =
contracts
142
=
Stock
Market
÷ =
Initial Investment
9 940,00$
21.94 X
shares in OM
14 200
Option
Market
x =
Contracts
142
Breakeven + = 15,70$15,00$ 0,70$
Leverage ÷
÷ =
10 000,00$
Call Calculation
Price per
contract
x =
Contract
Money to invest
Number of
Contracts
Stock Price = $15,36 Strike Price = $15,00

100 shares 0,33$ 33,00$
Share Contract
33,00$ 142
Contract contracts
33,00$ 4 686,00$
Contract Initial Investment
15,36$ 305
Share shares
100 shares 14 200
Contract shares
305
shares in SM
46.53 X
shares in OM
Option
Market
142
x =
Contracts
Leverage
14 200
÷ =
Breakeven - = 14,67$
Initial
Investment
142
x =
contracts
Stock
Market
4 686,00$
÷ =
Initial Investment
15,00$ 0,33$
Put Calculation
Price per
contract
x =
Contract
Number of
Contracts
10 000,00$
÷ =
Money to invest
Stock Price = $15,36 Strike Price = $15,00

Stock Price = 15.36
Delta = 0.6640 Vega = 0.0122 Theta = -0,0135 Rho = 0.0044
If the stock price
increases by 1% to
$15.51, the option
price will increase by
$0.66
If the volatility of the
stock increases by 1%
to $15.51, the price of
the option will
increase by 1.22%
If all is held constant,
in 24 hours the price
of the option will
decrease by 0.0135%
For every percentage
point increase in
interest rate, the value
of the option will
increase by 0.44%
New option price
$0.70 + $0.66
=$1.36
New option price
$0.70 x (1.0122)
=$0.709
New Option Price
$0.70 x (1.0135)
=$0.709
New Option Price
$0.70 x (1.0044)
=$0.703

Stock Price = 15.36
Delta = -0.3359 Vega = 0.0123 Theta = -0.134 Rho = 0.0024
If the stock price
increases by 1% to
$15.51, the option
price will increase by
$0.33
to $15.51, the price of
the option will
increase by 1.23%
If all is held constant,
in 24 hours the price
of the option will
decrease by 0.0134%
point increase in
interest rate, the value
of the option will
decrease by 0.24%
New option price
$0.70 - $0.33
=$0.37
New option price
$0.70 x (1.0123)
=$0.709
New Option Price
$0.70 x (1.0134)
=$0.709
New Option Price
$0.70 x (1.0024)
=$0.702

-20 000
-10 000
-
10 000
20 000
30 000
40 000
50 000
11 11.5 12 12.5 13 13.5 14 14.5 15 15.5 16 16.5 17 17.5 18 18.5 19
Series1
L
O
S
S
OUT OF THE MONEY IN THE MONEY
AT THE MONEY
BEEP
G
A
I
N

-20,000.00
-15,000.00
-10,000.00
-5,000.00
-
5,000.00
10,000.00
15,000.00
14 14.5 15 15.5 16 16.5 17
Series1
OUT OF THE MONEY
AT THE MONEY
IN THE MONEY
EPBE
L
O
S
S
G
A
I
N

-25 000
-20 000
-15 000
-10 000
-5 000
-
5 000
10 000
15 000
20 000
13.5 14 14.5 15 15.5 16 16.5
BAC STRADDLE CHART
Series1
Series2
Series3
G
A
I
N
L
O
S
S
IN THE MONEYIN THE MONEY AT THE MONEY
Call Option
Breakeven Price
Put Option
Breakeven Price

On StockTrak
Options
Bank of America: Straddle
Call Option Put Option
Symbol BAC1516J15 Symbol BAC1516V15
Bank Of America (BAC) Our Case Bank Of America (BAC) Our Case
Stock Price $15,36 Stock Price $15,36
Strike Price $15,00 Strike price $15,00
Option price per share $0,68 Option price per share $0,33
Option price per contract $68,00 Option price per contract $33,00
Breakeven Price $15,68 Breakeven Price $14,67
Number of contracts 142 Number of contracts 142,00
Investment $9 656,00 Investment $4 686,00
Bought on 9/29/15 Bought on 9/29/15
Sold on 10/16/15 Sold on 10/16/15
At the price of $1,27 At the price of $0,01
Change in price $0,59 Change in price $-0,32
Total Gain/Loss $8 378,00 Total Gain/Loss $-4 686,00
Return 86,76% Return -100,00%
Gain $8 378,00 Loss $-4 686,00
Days 18 Days 18
Annualized Return 1735,29% Annualized Return -2000,00%
TOTAL GAIN/LOSS $3 692,00

Off StockTrak
Bank of America: Straddle
Symbol BAC1516J15. Symbol BAC1516V15.
Stock Price when we bought $15,36 Stock Price when we bought $15,36
Stock Price when we sold $16,26 Stock Price when we sold $16,26
shares per contract 100 shares per contract 100
Amount you want to Invest $10 000,00 Amount you want to Invest $10 000,00
Strike Price $15 Strike Price $15
Option Price $0,68 Option Price $0,33
Breakeven $15,68 Breakeven $14,67
Price per contract 68 Price per contract 33
Number of contracts 142 Number of contracts 142
N of shares in OP 14 200 N of shares in OP 14 200
N of shares in SM 628 N of shares in SM 305
Sell $16,26 Buy $15,00
Buy $15,00 Sell $16,26
Profit $ 1,26 Profit $-1,26
x number of shares 14 200,00 x number of shares 14 200,00
total profit $17 892,00 total profit -17 892,00
-investment $ 9 656,00 -investment $4 686,00
Gain/Loss $ 8 236,00 Gain/Loss -4 686,00
ROI 85% ROI -100%
Total Gain/Loss $ 3 550,00

BE Call
option
BE Put
option
Bought when
Stock Price $15,36 Exercised when
Stock Price $16,26
Best when Stock
Price $16,29
Worst when Stock
Price $15,25

What drove the price of the stock
Bank of America beat Q3 estimates on October
14th

STRANGLE STRATEGY
Different strike prices
Same maturity
Same underlying asset
Profitable only if large
movements of the
underlying asset
Less expensive than a
straddle because contracts
are purchased out of the
money
A call and a put

Company overview
• Sector: Communication services
• Industry : Pay TV
• Market Cap : $ 41.7 B
• Traded on: Nasdaq
• Founded in : 1997
• HQ: Los Gatos, California
• Manager: Reed Hastings
• Main competitor
100 million
hours of TV
shows, movies,
documentaries,
series …
65 million
members
50 countries
2 450 Employees
(full time)
$6.11B
Revenue
Hong Kong (2016)
Singapore (2016)
South Korea (2016)
Taiwan (2016)
Italy (Oct 2015)
Portugal (Oct 2015)
Spain (Oct 2015)

Option Symbology
NFLX1516J98.5
NFLX1516V98
Company ticker:
Netflix
Call expiration date :
2015, 16th of October
Strike price
$98.50
Strike price
$98
Company ticker:
Netflix
Put expiration date :
2015, 16th of October

Net Income: $ 192.70M Net Income: $ <188.00M>
VALUATION/EFFICIENCY
VALUATION
Profitability
Profit margin (ttm) 3.15%
Operating Margin
(ttm)
5.69%
Management effectiveness
ROA (ttm) 2.72%
ROE (ttm) 10.58%
VALUATION
Profitability
Profit margin (ttm) <0.20%>
Operating Margin
(ttm)
0.80%
Management effectiveness
ROA (ttm) 1.06%
ROE (ttm) <1.68%>
EFFICIENCY (in thousand)
Revenue/Employee $2,247
Income/Employee $108,9
TAT 0.88
EFFICIENCY (in thousand)
Revenue/Employee $577,47
Income/Employee $<1,56>
TAT 1.82
Better efficiency
in using assets to
generate revenue
Better efficiency in
using assets to
generate net
income
Profits generated
compared to
money invested by
shareholders
Better efficiency
in keeping earning
compared to sales
Quarterly Revenue Growth: 23% Quaterly Revenue Growth:20%

Analyst’s recommendations
Rating Current
Month
Last
Month
Two
months
Ago
Three
months
ago
Strong
buy
1 1x9 = 9 1x9=9 1x8=8 1x10=1
0
Buy 2 2x16=
32
2x16=
32
2x15=
30
2x16=
32
Hold 3 3x14=
42
3x14=
42
3x15=
45
3x13=
39
Underp
erform
4 4x2=
8
4x2=
8
4x2=
8
4x1=
4
Sell 5 5x2=10 5x2=10 5x2=10 5x2=10
Total 101 101 101 95
Brokers 43 43 42 42
Weighted
Average
2.35 2.35 2.40 2.26
Rating Current
Month
Last
Month
Two
months
Ago
Three
months
ago
Strong
buy
1 1x14 =
14
1x13=
13
1x11=
11
1x12=
12
Buy 2 2x23 =
46
2x23=
46
2x18=
36
2x18=
36
Hold 3 3x6=
18
3x7=
21
3x14=
42
3x13=
39
Underp
erform
4 4x0=0 4x0=0 4x1=4 4x1=4
Sell 5 5x0=0 5x0=10 5x0=0 5x0=0
Total 78 80 93 91
Brokers 43 43 44 44
Weighted
Average
1.81 1.86 2.11 2.07
STRONG BUY / BUY
BUY/HOLD
More risky

Moving average
Buy Signal
Price>FMA>MMA>SMA
Sell Signal
Price<FMA<MMA<SMA

Bollinger bands
The price of the stock is banded by an upper and
lower band
10/15/2015
Earnings report
01/20/2015
Earnings report
04/15/2015
Earnings report
07/15/2015
Earnings report
Volatility
Periods of low volatility tend to be followed by
periods of high volatility and vice versa

Greeks
Actual price:
$98.35
Strike price:
$98.5
Option value:
8.7947
Volatility (%)
97.53
Delta
0.5605
Vega
0.0847
Theta
<0.2431>
Rho
1.01 x $98.35= $99.33 97.53% + 1% = 98.53%
97.53% - 1 % = 96.53%
If everything held
constant for 24 hours …
increase in interest rate
If the stock price increases
by 1% the new option
price will rise to $0.5605
stock increases by 1% then
the option price will
increase by 8.47%
The time value of the
option price will decrease
by 24.31%
The value of the option
will increase by 2.19%
New option price
$8.7947 + $0.5605
= $9.3552
New option price
$8.7947 x (1+0.0847) =
$9.5396
New option price
$8.7947 x (1- 0.2431) =
$6.6567
New option price
$8.7947 x (1+ 0.0219) =
$8.9873

Greeks
Actual price:
$98.35
Strike price:
$98
Option value:
7.5764
Volatility (%)
97.66
Delta
<0.4299>
Vega
0.0845
Theta
<0.2429>
Rho
<0.0215>
1.01 x $98.35= $99.33 97.66% + 1%= 98.66 %
97.66 – 1% = 96.66 %
If everything held
constant for 24 hours…
increase in interest rate,
If the stock price increases
by 1% the new option
price will fall by $ 0.4299
if the volatility of the
then the option price will
increase by 8.45%
the time value of the
option price will decrease
by 24.29%
the value of the option
will decrease by 2.15%
New option price
$7.5764 – $0.4299
= $7.1465
New option price
$7.5764 x (1+0.0845)
= $8.2166
New option price
$7.5764 x (1-0.2429)
= $5.7361
New option price
$7.5764 x (1+0.0215)
= $7.7393

Option Chain
CALL PUT
Last Change %Change Volume Open internet Last Change %Change Volume Open internet
Strike

Calculation (CALL)
Call Calculation
Price per contract
100 shares
x
$9,05
=
$905,00
Number of Contracts
$ 10 000,00
÷
$905,00
=
11
Initial Investment
11
x
$905,00
=
$9 955
Stock Market
$ 9 955,00
÷
$98,35
=
101
Option Market
11
x
100 shares
=
1 100
Breakeven $ 98,50 + $ 9,05 = $ 107,55
Leverage
1 100
÷
101
= 10,89
shares in OM shares in SM

Calculation (PUT)
Put Calculation
Price per contract
100 shares
x
$7,50
=
$750,00
Number of Contracts
$ 10 000,00
÷
$750,00
=
11
Initial Investment
11
x
$750,00
=
$8 250
Stock Market
$ 8 250,00
÷
$98,35
=
84
Option Market
11
x
100 shares
=
1 100
Breakeven $ 98,00 - $ 7,50 = $ 90,50
Leverage
1 100
÷
84
= 13,11
shares in OM shares in SM

Options
Netflix: Strangle
Symbol NFLX1516J98.5 Symbol NFLX1516V98
Netflix (NLFX) Our Case Netflix (NLFX) Our Case
Stock Price $98,35 Stock Price $98,35
Strike Price $98,50 Strike Price $98,00
Option price per share $9,05 Option price per share $7,50
Option price per contract $905,00 Option price per contract $750,00
Breakeven Price $107,55 Breakeven Price $90,50
Number of contracts 11 Number of contracts 11,00
Bought on 9/30/15 Bought on 9/30/15
Sold on 10/16/15 Sold On 10/16/15
At the price of $1,50 At the price of $0,04
Change in price $-7,55 Change in price $-7,46
Total Gain/Loss $-8 305,00 Total Gain/Loss $-8 250,00
Return -83,43% Return -100,00%
Loss $-8 305,00 Loss $-8 250,00
Days 17 Days 17
Annualized Return -1766,66% Annualized Return -2117,65%
TOTAL GAIN/LOSS $-16 555,00

-20 000
-10 000
-
10 000
20 000
30 000
40 000
50 000
60 000
70 000
50 60 70 80 90 100 110 120 130 140 150 160
Portfolioprofit
Stock price at expiration
Call Option
Call Option
Option Profit/Loss
In the
money
Out the
money
at the
money
- 20,000
- 10,000
-
10,000
20,000
30,000
40,000
50,000
60,000
50 60 70 80 90 100 110 120 130 140 150 160
Portfolioprofit
Stock price at expiration
Put Option
Put Option
In the
money
Out the
money
at the
money
Option Premium $7.50
Option Premium $9.05

Option Profit/Loss • Unlimited gain if
price >$115
• Limited gain if
Price< $85
Stock Price
Call Option Max
profit/Loss
Put Option Max
profit/Loss
Portfolio Max
profit/Loss
0 -9 951 0 117 550,68 107 600
5 -9 951 5 111 050,68 101 100
10 -9 951 10 104 550,68 94 600
15 -9 951 15 98 050,68 88 100
20 -9 951 20 91 550,68 81 600
25 -9 951 25 85 050,68 75 100
30 -9 951 30 78 550,68 68 600
35 -9 951 35 72 050,68 62 100
40 -9 951 40 65 550,68 55 600
45 -9 951 45 59 050,68 49 100
50 -9 951 50 52 550,68 42 600
55 -9 951 55 46 050,68 36 100
60 -9 951 60 39 550,68 29 600
65 -9 951 65 33 050,68 23 100
70 -9 951 70 26 550,68 16 600
75 -9 951 75 20 050,68 10 100
80 -9 951 80 13 550,68 3 600
85 -9 951 85 7 050,68 -2 900
90 -9 951 90 550,68 -9 400
95 -9 951 95 -5 949,32 -15 900
100 -8 301 100 -9 849,32 -18 150
105 -2 801 105 -9 849,32 -12 650
110 2 699 110 -9 849,32 -7 150
115 8 199 115 -9 849,32 -1 650
120 13 699 120 -9 849,32 3 850
125 19 199 125 -9 849,32 9 350
130 24 699 130 -9 849,32 14 850
135 30 199 135 -9 849,32 20 350
140 35 699 140 -9 849,32 25 850
145 41 199 145 -9 849,32 31 350
150 46 699 150 -9 849,32 36 850
155 52 199 155 -9 849,32 42 350
160 57 699 160 -9 849,32 47 850
165 63 199 165 -9 849,32 53 350
-30 000
-20 000
-10 000
-
10 000
20 000
30 000
40 000
50 000
60 000
70 000
50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165
PortfolioProfit
Stock Price at Expiration
Call Option
Put Option
Portfolio
Put Option
Call Option
Breakeven Price
Exercise Price

STRATEGY FIT
• “NFLX is a super junk bond in term of risk” David Trainer
• Self-fulfilling stock-price-appreciation machines,
• Expensive growth,
• Investors are increasingly putting a premium on real and
sustainable profits across the tech sectors
RISK
VOLATILITY
• Operating and Financial leverage combined
$1.6 billion in cash
$2.6 billion in tangible assets
$11 billion of real liabilities
• Tech sector is highly volatile
http://blogs.reuters.com/felix-salmon/2011/10/25/why-netflix-stock-is-so-volatile/
http://www.marketwatch.com/story/netflix-is-a-great-service-but-a-poor-investment-2014-12-15?page=2
http://www.benzinga.com/analyst-ratings/analyst-color/15/04/5407137/why-is-netflix-so-volatile

What Happened ?
7 new
series for
kids
Tech leader
rally
Subscription
fees from
$8.99 to
$9.99 /
month
Q3 earnings
results :
MISSED !!

Best/Worst
Bought
$98.35
Best (CALL)
$115.83
Best (PUT)
$98.41
Sold
$98.99
Be for CALL
$107.55
Be for PUT
$90.50
Be for CALL
$90.50
WORST

Protective Put - To hedge the Long
Position

Initial Investment (09/23/2015):
Long Position Amazon – AMZN
Number of Shares 186 sh
Price per Share $537.60
Total Investment $99,993.60

Sell Signal
Price<FMA<MMA<SMA
Buy Signal
Price>FMA>MMA>SMA

Overbought signal = excessive
demand
Demand & Price high
Price will decrease
Oversold signal = excessive
selling
Supply & Price Low
Price will rise

Company ticker:
Amazon
Strike Price:
$535.00
Put Expiration Date:
2015, 23rd of October

Our Case
Stock Price 526,73$
Strike Price 535,00$
Option price per share 30,65$
Number of shares per contract 100
Option price per contract 3 065$
Breakeven Price 504,35$
Number of contracts 1,00
Investment 3 065,00$
Leverage 0,54
Bought on 10/2/15
Expired on 10/23/15
At the price of -$
Change in price -30,65$
Total Gain/Loss -3 065$
Return -100,00%
Days 22
Annualized Return -1636,36%
Breakeven:
$535 - $30.65 = $504.35
Contract:
$30.65/sh x 100 sh/contracts = $3065c
186 Shares to hedge = 1 contract
# of Share
Option Market:
1c x 100 sh/c = 100 shares
Stock Market:
$3065/$526.73/share=5 shares
Leverage:
100sh /5sh = 20X

$(120,000)
$(100,000)
$(80,000)
$(60,000)
$(40,000)
$(20,000)
$-
$20,000
$40,000
$60,000
$80,000
$- $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 $600 $650 $700 $750 $800 $850
Total Net Profits/(Losses)
Price/share
Protective Put - Amazon
Option Market
Stock Market
Portfolio Balance
Strike Price $535.00Breakeven $504.35
At The Money
Out Of The
Money
In The Money
Option Premium $3,065

Option Market Best Case BreakEven Strike Price
Sell 535,00$ 535,00$ 535,00$ 535,00$ 535,00$ 535,00$ 535,00$ 535,00$ 535,00$ … 535,00$
Buy -$ 473,70$ 500,00$ 504,35$ 505,42$ 526,73$ 535,00$ 543,21$ 550,00$ … 650,00$
GP/sh 535,00$ 61,30$ 35,00$ 30,65$ 29,58$ 8,27$ -$ -$ -$ … -$
# of sh 100 100 100 100 100 100 100 100 100 … 100
GP 53 500$ 6 130$ 3 500$ 3 065,00$ 2 958$ 827$ -$ -$ -$ … -$
Investment 3 065$ 3 065$ 3 065$ 3 065,00$ 3 065$ 3 065$ 3 065$ 3 065$ 3 065$ … 3 065$
NP 50 435$ 3 065$ 435$ -$ (107,00)$ (2 238)$ (3 065)$ (3 065)$ (3 065)$ … (3 065)$
ROI 1645,51% 100,00% 14,19% 0,00% -3,49% -73,02% -100,00% -100,00% -100,00% … -100,00%
Stock Market
Sell -$ 473,70$ 500,00$ 504,35$ 505,42$ 526,73$ 535,00$ 543,21$ 550,00$ … 650,00$
Buy 526,73$ 526,73$ 526,73$ 526,73$ 526,73$ 526,73$ 526,73$ 526,73$ 526,73$ … 526,73$
NP/sh (526,73)$ (53,03)$ (26,73)$ (22,38)$ (21,31)$ -$ 8,27$ 16,48$ 23,27$ … 123,27$
# of sh 186 186 186 186 186 186 186 186 186 … 186
NP (97 971,78)$ (9 863,58)$ (4 971,78)$ (4 162,68)$ (3 963,66)$ -$ 1 538,22$ 3 065,28$ 4 328,22$ … 22 928,22$
Investment 97 971,78$ 97 971,78$ 97 971,78$ 97 971,78$ 97 971,78$ 97 971,78$ 97 971,78$ 97 971,78$ 97 971,78$ … 97 971,78$
ROI -100,00% -10,07% -5,07% -4,25% -4,05% 0,00% 1,57% 3,13% 4,42% … 23,40%
Portfolio Balance
Buy -$ 470,00$ 500,00$ 504,35$ 505,41$ 526,73$ 535,00$ 543,21$ 550,00$ … 650,00$
Max profits/Losses (47 536,78)$ (6 798,58)$ (4 536,78)$ (4 162,68)$ (4 070,66)$ (2 238,00)$ (1 526,78)$ 0,28$ 1 263,22$ … 19 863,22$
ROI -47,05% -6,73% -4,49% -4,12% -4,03% -2,22% -1,51% 0,00% 1,25% … 19,66%
Worst case
(infinity)
Best case
(infinity)
Worst case
(infinity)
Worst case
(infinity)
Best case
(infinity)
Bankruptcy:
NP = $50,435
ROI = 1645.51%
At The Money
Out Of The
Money
In The Money

Option Market Our case Best Case Worst Case
Sell 535,00$ 535,00$ 535,00$
Buy 599,03$ 519,89$ 619,45$
GP/sh -$ 15,11$ -$
# of sh 100 100 100
GP -$ 1 511$ -$
Investment 3 065$ 3 065$ 3 065$
NP (3 065)$ (1 554)$ (3 065)$
ROI -100,00% -50,70% -100,00%
Annualized Return -1636,36% -2607,50% -1636,36%
Buy on 10/02/15 10/02/15 10/02/15
Sell on 10/23/15 10/08/15 10/23/15
# of days 22 7 22
Loss:
$3,065 – $0 = $(3,065)

Bought
$526.73
Sold
$599.03Best $519.89

Bought
$526.73
Worst
Above $535.00
Sold
$599.03

ZN/Z5
USDTREASBDS10YDEC15
Index ticker: 10-Years T-Bond December 2015

Where is it traded? CBOT electronic trading
When is it traded?
When does it expire?

Number of
contracts
Investment
$50,000 / $1,623 = 30 contracts
$1,623 * 30 contracts = $48,690

Multiplier
Leverage
30 contracts * $100,000 = $3,000,000
$3,000,000 / $48,690 = X61.61

Volatility increases Volatility decreases
Overbought market that
may continue to become
more overbought

Fast moving average
Slow moving average
Extremely bullishBuy signal
FMA > MMA > SMA
Sell signal
FMA < MMA < SMA

Oversold
Overbought
RSI is in neutral territory

2015
Slow economic growth
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2008 2009 2010 2011 2012 2013 2014 2015
U.S. Inflation rate
Inflation rate Expected Inflation rate
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2010 2011 2012 2013 2014 2015
U.S. Unemployment Rate
Unemployment Rate Expected Unemployment rate
FED keeps interest rates low
Treasury prices remains high
Futures prices stay high

-40% -27% -16% -7%
LOW INTEREST RATES EXPECTATION TREASURY PRICES INCREASE

Traders Don’t See Fed Moving Until At Least March, Futures ShowGulf Widens Between Fed Forecasts and Signal From Futures MarketHSBC's Major, Who Called 2014 Bond Rally, Cuts Yield Forecasts

Our case Best Case Worst case
Bought $128,78 $128,78 $128,78
Sold $129,33 $129,62 $125,70
# of contracts 30 30 30
Unit per contract 1 000 1 000 1 000
Long Amount $3 863 400,00 $3 863 400,00 $3 863 400,00
Sell Amount $3 879 900,00 $3 888 600,00 $3 771 000,00
Initial Margin $1 623,00 $1 623,00 $1 623,00
Leverage 79,35 79,35 79,35
Total Gain/Loss $16 500,00 $25 200,00 -$92 400,00
Return 0,43% 0,65% -2,39%
Bought 10/7/15 10/7/15 10/7/15
Sold 10/14/15 10/14/15 11/9/15
# of days 8 8 33
Annualized return 19,22% 29,35% -26,09%
Bought
Best Case Worst Case
Sold

Based on rate hike expectations
Wage gains could pop to 2.6 percent in December
Waiting too long for liftoff would raise risk of recession

S&P 500 Index
Healthcare sector in
an upward trend
Bullish market
indicator
Long position
on the S&P 500

ES/Z5
Index
symbol
Expiration date
Dec 2015
S&P E-MINI 500 IDX DEC15

$50, 000 / $3850 = 12.99 = 12 contracts
Contract
Investment
Maximum investment Margin
3, 850 x 12 contracts = $46, 200
Leverage
$1, 974 X 50 S&P Index = $98, 700
S&P Index
Price paid Multiplier
$98, 700 / $3850 = 26x
Contract

http://www.barchart.com/charts/futures/ESZ15&style=technical
Buy signal
Sell signal
Price<FMA<MMA<SMA
Price>FMA>MMA>SMA

Overbought Oversold

Volatility
increases
Volatility
decreases

Chinese Crisis
http://www.zacks.com/stock/news/180936/stock-market-news-for-july-08-2015
http://www.valueline.com/Markets/Daily_Updates/Stock_Market_Today__July_27,_2015.aspx#.VheHmi7tmko
http://www.zacks.com/stock/news/190247/stock-market-news-for-september-16-2015
http://www.zacks.com/stock/news/191596/stock-market-news-for-september-28-2015
http://uk.businessinsider.com/wall-street-says-to-buy-biotechs-2015-10?r=US&IR=T
Good performance from
the S&P 500’s giants Hillary Clinton's tweet
made healthcare
sector crash

• US STOCKS-S&P 500 reaches three-week
high as health stocks rally
http://finance.yahoo.com/news/us-stocks-p-500-reaches-203135630.html
https://finviz.com/map.ashx?t=sec&st=w1
Healthcare sector
Three-week high
“Reached deals
to cover two
costly new
cholesterol
drugs”

• This bullish indicator is screaming buy
http://finance.yahoo.com/video/bullish-indicator-screaming-buy-
173000774.html
Bullish when the price
crosses the 50 day
average
October 7th 2015

Biotech giants under
heavy selling
Biotech and energy
giants rose
Fears of slowing growth
in China

Bought $1 974,00 $1 974,00 $1 974,00
Sold $1 999,25 $2 110,25 $1 971,00
Unit per contract 50 50 50
Long Amount $1 184 400,00 $1 184 400,00 $1 184 400,00
Sold Amount $1 199 550,00 $1 266 150,00 $1 182 600,00
Initial Margin $3 850,00 $3 850,00 $3 850,00
Leverage 25,64 25,64 25,64
Total Gain/Loss $15 150,00 $81 750,00 -$1 800,00
Return 1,28% 6,90% -0,15%
Bought 10-7-15 10-7-15 10-7-15
Sold 10/13/15 11-3-15 10-9-15
# of days 6 26 2
Annualized return 76,75% 95,57% -27,36%
Worst
ESZ5 $1971.00
Sold
ESZ5 $1999.00
Best
ESZ5 $2110.00Bought
ESZ5 $1974.00
Worst
ESZ5 $1971.00
Best
ESZ5 $2110.00
Worst
ESZ5 $1971.00
Best
ESZ5 $2110.00
Worst
ESZ5 $1971.00
Best
ESZ5 $2110.00
Worst
ESZ5 $1971.00
Best
ESZ5 $2110.00

Renminbi Currency
Symbol
(can also be CNY)
Symbol for
month of
December
Symbol for
the year
2015

• PBOC is repegging the CNY to the USD because China wants its currency to enter IMF’s
SDR  Will become a reality on October 1st, 2016.
• BUT, the Chinese economy is slowing down. Desperate need for QE.
• China is historically known for its dumping strategy. China’s favorite move is to dump
its products in foreign markets using a devalued CNY.
• Large capital outflows threatens Chinese economy stability.
• The Fed will soon raise Interest Rates and thus pressure China, which would have to
sell-off many securities and US Treasuries to keep the CNY peg to the USD.
• I believe the devaluation of the Yuan in August 2015 was China delivering a sample
test on its economy to weigh impact of further intentional devaluation of the
Renminbi.
• This is part of our risky investment strategy. We basically bet on something that has
few chances of happening within our trading scope.

1 Contract = CNY 1,000,000
Traded at the Chicago
Mercantile Exchange Globex
(electronic futures trading
platform).
The contracts ends before
market opens on the second
Beijing business day
immediately preceding the
third Wednesday of the
contract month.
Our contract was a December
2015 contract, which
indicates that it would would
have ended on Monday, 14th
of December 2015 at 9.00
AM Beijing time.

• Slowdown + Revaluation for past 7 years
China suffers from the 2008 crisis – bought
American debt + massive cut in exports
China still in convergence
 Chinese goods are more
demanded than Japanese
goods.
Chinese desire to set
the CNY as a reserve
currency  Enter the
SDR basket.
?

Perpetual 25 Bpts
Had to cut IRs several
times – six times in
2015
+25 Bpts in Q1
2016?

“China's foreign-exchange reserves
dwindled further in September, a trend that
likely will force the country's central bank
to step up monetary easing.”
“Beijing traditionally has relied on an influx
of capital for its money supply--not a
problem as foreign-exchange reserves piled
up when the central bank bought dollars
from the country's exporters.”
“With inflows turning into outflows as the
Chinese economy slows, the bank finds itself
having to look for other channels--such as
direct lending to financial institutions and
government bond buying--to create money
and keep liquidity flowing.”
“The People's Bank of China on Wednesday
said currency reserves fell $43.3 billion in
September to $3.51 trillion as more funds
left the country, the fifth consecutive
monthly drop but a less sharp one than the
record $93.9 billion plunge the previous
month.”
“Despite what has appeared to be extraordinary
credit-easing measures by the PBOC over the
past year, the central bank has fallen short,
economists say. Not only have its efforts failed
to jump-start productive lending to spur
growth, but the lower foreign-exchange inflows
have meant that the PBOC's own assets haven't
kept pace with growth.”
“The PBOC has been a bit behind the curve
on easing. But the falling reserves will make
it more likely for the central bank to speed
up its loosening efforts in the coming
months.”
“a once-in-a-decade transition in China's
monetary-policy framework.”
“From January through August, the PBOC
pumped around 1 trillion yuan ($156 billion)
into China's financial system through a
combination of measures such as open-
market operations and direct lending to
banks.”
“But despite such loans, which count as
assets on the PBOC balance sheet, the
central bank's assets have fallen since the
end of last year and have shrunk as a
percentage of China's gross domestic
product--indicating that money creation
hasn't kept pace with the scale of the
economy.”
 DEVALUATION NEEDED
“But in recent months, as the economy has
continued to sputter, the central bank, which
answers to the Chinese leadership, has caved in
to political pressure and stepped up its easing
efforts. Since November, it has broadly reduced
banks' reserve requirements three times and
slashed interest rates five times.”
“Many analysts expect several further cuts
in reserve requirements before the end of
the year to offset capital outflows.”
“Another path that some analysts say the
PBOC may take is a bond-buying program
similar to those adopted by its counterparts
in developed countries. It certainly has room
to do that: Government bonds represented
only 4.5% of all of the 33.7 trillion yuan in
assets held by the Chinese central bank as of
June, while foreign-exchange reserves
accounted for 82%. By comparison, more
than 50% of the assets owned by the U.S.
Federal Reserve consisted of government
securities.”
“So far, officials at the PBOC have
repeatedly dismissed the idea of it
launching a direct bond-buying program,
saying China doesn't need a so-called QE to
help bolster growth.”
 DEVALUATION IDEA PREVALENT
“If China wants to hit its annual growth
target of 7% this year, this is the time for a
decisive easing move."

Truckload of money, which makes of China the richest country in the world in
terms of foreign reserves. At first, the drop was due to capital outflows and
now, it is China delivering the first open-market operations of its QE.

0
Price
Output
D1
S1
Eq. p.
Eq. o.
D2
New
Eq. p.
New
Eq. o.
equilibrium
New
equilibrium
Capital inflows would increase,
investors would come to China
and flee the US.
Strong impact
on GDP
Demand for CNY
increases, GDP
increases.

0
Price
Output
D1
S1
Eq. p.
Eq. o.
S2
New
Eq. p.
New
Eq. o.
equilibrium
New
equilibrium
Capital inflows would increase,
investors would come to China
and flee the US. CNY may be
devalued.
Strong impact
on GDP
Supply for CNY
increases, GDP
increases.

Patterns proper to
fixed exchange rates
Off-track
adjustments
Off-track
adjustments
Announces a
bull trend
Announces Bear
market
Announces
Bear market

Death Cross because
of CNY devaluation.
Death Cross
forming
itself.
Death Cross
followed by
bear market.
Golden Cross
followed by bull
market.

Do not Buy, it is too late, stock is overbought.
Do not Sell, it is too late, stock is oversold.
Perfect time to buy or short

$ 50,000 - $ 10 = $ 49,990
Base Investment
Amount
Stocktrak
Commission
Real Amount for
Investment
$ 49,990 / $ 1,500/contract = 33
Real Amount for
Investment
Margin at t=0 Contracts Shorted
$ 1,500/contract x 33 = $ 49,500
Margin at t=0 Contracts Shorted Total Investment
1 = CNY 1,000,000
Contract Units
33 x CNY 1,000,000 = CNY 33,000,000
Contracts Shorted Units per Contract Total Units Shorted
$ 49,500 x USD=CNY 6.4267 = CNY 318,121.65
Total Investment CNY per USD (Bid) Could Have Purchased
CNY 33,000,000 / CNY 318,121.65 = 103
Units per Contract
Could Have
Purchased
Leverage
Shorted 33 futures contracts of CNY against USD
Short $ 0.1555 $ 0.1555 $ 0.1555
Cover $ 0.1556 $ 0.1545 $ 0.1565
Shorted Investment $ 49,500 $ 49,500 $ 49,500
Covered Amount $ 49,517.50 $ 49,167.44 $ 49,803.92
Unleveraged Change ($17.50) $332.56 ($303.92)
Leverage 103.70 103.70 103.70
- Comission ($ 10) ($ 10) ($ 10)
+ Dividend - - -
Short on 10/8/15 10/08/15 10/08/15
Cover on 30/11/15 11/23/15 10/30/15
# of days 53 46 22
Total Gain/Loss ($ 1,815) $ 34,485 ($ 31,515)
USD Return % (3,67%) 69,67% (63.67%)
Annualized return % (24,91%) 545,22% (1041,82%)
USD Investment $ 49,500.00
Open Short CNY=USD $ 0.1555
Close Cover CNY=USD $ 0.1556
Appreciation % (0,0353%)
End USD $ 47,685.00
Unleveraged USD Return % (0.0353%)
Leverage 103.70
Real USD Return % (3.67%) 1st method
Real USD Return % (3.67%) 2nd method

Shorted
CNYUSD=0,1556
0.00% return
11/30/2015
10/30/2015
Worst Case
CNYUSD=0,1565
(59.52%) return
11/30/2015
Best Case
CNYUSD=0,154
5
72.87% return
Covered
CNYUSD=0,155
7
(3.67%) return
10/08/2015
• China cut interest rates by 25 Bpts on October 23rd, 2015. Interest rate at 4.35%.
• Reluctance of China to apply QE (too proud to apply an American-style QE)
• “Making a note of China Central Bank’s open market operations, PBOC drains a net 50 bln
Yuan for the week, versus a net 50 injection last week.” Peg seems to be priority.

• US oil settles up 4.9%, at $48.53 a barrel
– "We have reduced the probability of a return to the $37-38 area
per nearby WTI,” (Jim Ritterbusch)
– "We will maintain a long standing view that price declines below
this support level are virtually off of the table.” (Jim Ritterbusch)
– Global oil demand will grow by the most in six years in 2016
while non-OPEC supply stalls. (CNBC)
– Demand is expected to rise 270,000 bpd to 95.2 million barrels a
day, up 0.3 percent from September's forecast. (CNBC)
– OPEC Secretary-General Abdullah al-Badri said at a conference
in London that OPEC and non-OPEC members should work
together to reduce the global supply glut. (CNBC)
Demand for oil expected to increase  Price is expected to rise
Supply for oil expected to fall  Price is expected to increase

• Putin brings geopolitical risk back into oil
– Russia's military buildup and bombing campaign in Syria this week
rekindled the security premium in oil prices. (CNBC)
– While the supply and demand fundamentals of oil remain
overwhelmingly bearish or negative for prices, Russia's involvement
caused prices to surge higher the past two weeks. (CNBC)
– Prices rallied again earlier this week, on news of the initial bombing
sorties carried out by the Russian air force. (CNBC)
Instability in the Middle East Increase  Price of oil expected to rise
Iraq Kuwait
war 1990
US Invasion
in Iraq
Russian Intervention in
Syria

Price
Qty
S
D
Demand increase
Supply decrease
S’
D’

NYMEX  WTI crude oil is traded at the New York Mercantile Exchange
1 Contract contains 1000 barrels of oil
For 11 contracts: 11 x 1000 barrels = 11,000 barrels
Trading terminates on October 21st
The value changes by $10.00 every time price moves by 1 cent

Margin $4 510,00
Investment $50 000,00
Multiplier 1000Barrels
Price of the crude oil
48,92
Barrels
Number of contracts =
$50 000,00
= 11contracts
$4 510,00
Actual Investment $4 510,00 x 11contracts $49 610,00
Total Price 1000 barrels x 11 contracts x
$48,92
= $538 120,00
Barrel
Total number of barrels
1000
x 11 contracts = 11000 barrels
contract
Leverage
$538 120,00
= 10,85x
$49 610,00

Price>SMA(3)>SMA(10)>SMA(20)
Golden cross Golden cross
Golden cross
Golden cross
Death cross
Death cross
Death cross

?
Price hits the upper
band of the Bollinger
bands  Sell signal

Sold
$46.64
Best
$50.92
Worst
$44.86
Bought
$48.92

Futures
WTI oil Long Position
Symbol CL/X5
Bought $48,92 $48,92 $48,92
Sold $46,64 $50,92 $44,86
Unit per contract 1 000 1 000 1 000
Long Amount $538 120 $538 120 $538 120
Sell Amount $513 040 $560 120 $493 460
Initial Investment $49 610 $49 610 $49 610
Initial Margin $4 510 $4 510 $4 510
Leverage 10,85 10,85 10,85
Comission -$20 -$20 -$20
Total Gain/Loss -$25 080 $22 000 -$44 660
Return -50,55% 44,35% -90,02%
Bought 10/7/15 10/7/15 10/7/15
Sold 10/13/15 10/9/15 10/20/15
# of days 7 3 14
Annualized return -2599,94% 5321,51% -2314,86%

Rumors the Fed will increase
the Interests in October
Rumors the Fed will increase
the Interests in November
OPEC Countries failed reaching
an agreement concerning
supply limit

“The bank is bearish on crude oil, aluminum, platinum, iron ore, cocoa and
wheat in the next three to six months.”
http://www.bloomberg.com/news/articles/2015-10-05/commodity-collapse-has-more-to-go-as-
goldman-to-citi-see-losses
Commodity Collapse Has More to Go as Goldman to Citi See Losses -10/05/15
Bloomberg
Rule #1: “The trend is
your friend”

Commodity ticker:
Cocoa
Delivery month:
December 2015

ICEUS  Cocoa is traded at the Intercontinental Exchange
1 Contract contains 10 metric tonnes of cocoa
For 62 contracts: 62c x 10 metric tonnes = 620 metric tonnes
contract
Trading terminates on December 16th
The value changes by $0.10 every time price moves by 1 cent

# of
contracts
Investment
Leverage
Total price
$50,000 = 62 contracts
$800/c
$800/c x 62c = $49,600
$1,900,300 / $49,600 = 38.31 X
Initial Investment:
$50,000
10 metric tonnes x 62c x $3,065 = $1,900,300
Contract metric tonnes

Bearish trend
Price likely to fall
Bearish signal
when we shorted
cocoa

Our Case Best Case Worst Case
Short $3 065 $3 065 $3 065
Cover $3 152 $3 026 $3 406
Unit per contract 10 10 10
Short Amount $1 900 300 $1 900 300 $1 900 300
Cover Amount $1 954 240 $1 876 120 $2 111 720
Initial Investment $49 600 $49 600 $49 600
Initial Margin $800,00 $800,00 $800,00
Leverage 38,31 38,31 38,31
Comission -$20 -$20 -$20
Total Gain/Loss -$53 940 $24 180 -$211 420
Return -108,75% 48,75% -426,25%
Shorted on 10/09/15 10/9/15 10/9/15
Covered on 10/19/15 10/12/15 11/20/15
# of days 11 4 42
Annualized return -3559,09% 4387,50% -3653,57%
Cocoa Short Position
Symbol CC/Z5
Loss:
$1,900,300 – $1,954,240
= $(53,940)
Total Loss $(53,940)

“Tuesday's bounce is likely traders buying futures to cover their bearish bets
in case European grindings come in higher.” said Julie Wernau
http://www.nasdaq.com/article/cocoa-prices-bounce-ahead-of-demand-data-oj-rises-on-fewer-
oranges-20151013-01008
Cocoa Prices Bounce Ahead of Demand Data; OJ Rises on Fewer Oranges-
10/13/15 Nasdaq.com
Cocoa was priced during 3 weeks for an anticipation in weaker demand while
European demand have been less bearish than expected.
West Africa see rainfall after two months of drier than normal weather.
“The trend was not
my friend”!
Europe is the largest consumer of chocolate in the world.

Shorted
$3,065
Best
$3,026
Worst
$3,406
Covered
$3,152

http://www.infomine.com/ChartsAndData/ChartBuilder.aspx?gf=110563.USD
Copper- Industry Overview
Definition
Applications
Metal
Chemical element
Extracted or Minded
Electrical & Thermal
conductor
Architecture
Tube, pipe and fittings
Telecommunication
Automotive

Biggest Companies
1.8 million tonnes
1.47 million tonnes 1.30 million tonnes
1.20 million tonnes
665,000 tonnes
636,000 tonnes 380,000 tonnes
506,000 tonnes 504,000 tonnes
455,000 tonnes

Future Symbol
HG/Z5
COPPER/DEC 15
Commodity ticker:
High Grade Copper
Expiration month & year:
December 2015
Commodity
Copper
Expiration month
December
Expiration year
2015

Contract Specification
Commodities Mercantile ExchangeWhere ?
When?
Expiration
How big ?
25,0000 pounds/contract
25,000 pounds x 11 = 275,000
pounds

Calculation
N° of
contract
$ 50,000 /($ 4,400/contract) = 11 contracts
Investment 11 contracts * $ 4,400/contract = $48,400
Invest/price $48,400 /$ 2.3830 lbs = 20,310 lbs
25,000 lbs/contract * 11 contracts = 275,000 lbs x $2.3830 = $655,325Multiplier
Leverage $655,325 / $48,400 = 13X
Price paid
$ 2.3830/lbs

Bollinger Bands, Moving average
& RSI
Bollinger Bands
Volatility
Moving Average
SELL signal
Price<FMA<MM
A<SMA
BUY signal
Price>FMA>MM
A>SMA

MACD
MACD below SMA
= Bearish signal
SELL = Price 
MACD above SMA
= Bullish signal
BUY = Price 

Trend spotter
Bullish Trend
Bearish Trend
Neutral Trend
Bullish Trend (BUY= P)
Bearish Trend (SELL=P)

Supply  + Demand =P
WHY ??
Incentive for extraction today rather than tomorrow
Encourages speculators to shift from commodity to
treasury bills
Most commodities are priced in dollars,
$  = internationally traded commodities (in$) 
Hike in interest rate
China represents 45% of global demand
for copper
Then, shift to a “new normal”
Economic slowdown
Less demand for housing, construction, cars
( wiring, piping general industry)
Chinese industrial profits declined 8.8 % (2014)
CNY
USD

Strategy Fit
DEMAND
SUPPLY
Global economic slowdown
China
Short Run
Drop in demand
because of growth
slowdown
Long Run
Emergence of middle
class
=
Housings, cars,
electronics, industry Supply


What Happened ?
China growing
concerns
+
Glencore, low
commodity
price outlook
Cost of
Copper at a 6
½ year low
Decreasing
demand
China
growth &
industrial
production
slowdown
Emerging
market
stocks 
= Raw
materials
Yellen set up
stage for Dec
IR hike
+
China
missing
arbitrage

Creation in 1927
Level 1: - Most basic type of ADR
- Easy and inexpensive way to gauge interest for its securities in North America
- Have the loosest requirements from the SEC
Level 2: - Listed on an exchange or quoted on Nasdaq
- Have slightly more requirements from the SEC
Level 3: - Are able to raise capital and gain substantial visibility in the U.S. financial markets.
Flexibility
Liquidity
Increase in capital
Company’s visibility in the US
Improvement of price parity with the US
Easy to buy
Portfolio diversification, access to more companies
Availability of information on the company
Dividends and capital gain in USD
ADRs are attractive for both the Issuer and the Investor, BUT they do not eliminate currency and economic
risks in the company’s home country.
Issuer Buyer
3 levels of ADRs

1901
40,000
employees
$16B
NYSE
Steel
Company
Porto
Allegre

The company has outperformed compared
to the industry and the sector this year
For the coming years, the company is expected
to do better than the industry and the sector

Volatility increases Volatility decreases
Low volatility
Oversold market that may continue
to become more oversold

Fast moving average
Slow moving average
Buy signal
FMA > MMA > SMA
Sell signal
FMA < MMA < SMA
Extremely bearish

Oversold
Overbought
Bearish trend
RSI is low which means it can turn into a bullish trend

Steel production by country (million tons) Steel production growth rate

P
Q
CHINA
Chinese Demand collapsed as growth slowdown
Demand is decreasing with prices
Banks are tightening lending
China output collapsed by 20%
China input decrease
http://www.bloomberg.com/news/articles/2015-10-28/china-steel-chief-says-demand-evaporating-at-unprecedented-speed

P
Q
INDIA
Steel import tax increase
Cost of production increase
Indian output decrease
Indian input collapse
http://www.bloomberg.com/news/articles/2015-10-08/steel-imports-by-india-slow-in-september-on-import-tax-increase

Chinese export of steel decrease
Indian export of steel decrease
Brazil export of steel will increase
Gerdau’s revenue will increase
Q
P
BRAZIL

Even though Brazilian fundamentals are really bad, Gerdau has an
international exposure compared to its Brazilian competitors
With a large North-American business, Gerdau saw sales pick up
in October
As Indian and Chinese exports for steel will decrease, Gerdau will
gain market shares
http://www.bloomberg.com/news/articles/2015-10-29/fortunes-diverge-for-brazil-s-steel-barons-amid-economic-crisis

BRL = USD0.25902
BRL100,000
Contract
BRL100,000 = USD25,902
USD25,902 / USD1.39 = 18,634 shares
share
Real investment: 18,634 shares X $1.39 = USD25,901
share

Bought $1,44 $1,44 $1,44
Sold $1,58 $1,73 $1,31
# of shares 18 634 18 634 18 634
Initial Investment $ 26 832,96 $ 26 832,96 $ 26 832,96
Sold Amount $ 29 354,14 $ 32 236,82 $ 24 410,54
+ Dividend 0,01 0,01 0,01
Bought on 11/02/15 11/02/15 11/02/15
Sold on 11/30/15 11/25/15 11/17/15
# of days 29 24 16
Total Gain/Loss $2 707,52 $5 590,20 $-2 236,08
Return % 10,09% 20,83% -8,33%
Annualized return % 125,26% 312,50% -187,50%
Bought
Best Case
Worst Case
Sold

Gerdau SA, raised about $239 million in a private transaction to help repay debt
Nucor Corporation has agreed to buy Gerdau Long Steel's Bright Bar
-6% +15%
Gerdau SA announced to pay $0.01 of dividend on November 27th

Source: Eikon as of 9/30/15. Reflects most recent data available. Credit ratings by
Standard & Poor's.
Emerging markets:
High yield because of
uncertain economic
conditions.
China: uncertain growth
Brazil & Russia: Recession
BBB-

Consumption
decrease
Investment
decrease
2.7 %
-2.6 %
Δ -5.3 %
Petrobras Scandal
March 2014

Source: worldbank.org
Economy:
#1 of Latin America
#7->9 of the World
20142015

Below expectation (7,7%)
Economy is going better
than expected
+3.3 %

Partners:
China 19%
US 10%
Argentina 7.8%
Netherlands 6.6%
Partners:
China 15%
US 14%
Argentina 6.9%
Germany 6.4%
South Korea 4.1%
Exports
Imports
Imports
Exports
Trade
Balance

IR increase
Return increase
14.25%
11.25%

US$=BRL3.7966
US$=BRL2.6004
+46%
Too High

Buy signal when we
have long the
Brazilian Real
MACD crosses down
the Signal Line
MACD:
12 average period
minus
26 average period
MACD Signal Line:
9 period moving
average of the MACD

Golden cross
Golden cross
Death cross
Death cross
At the long date:
• Golden Cross
• Price<FMA(3)<SMA(20)
 Signals the price of the Brazilian real will rise
Death cross

 Earnings on October 27th, 2015
 Our team believes it will beat
the estimates.
 Pharmaceutical company managing
billions of Swiss Francs
 Including very high profits
 attractive for investors
 Company investing in Cancer fight
 Recently bought Admune,
specialized in cancer research
 The CHF is overvalued to
maintain Safe Haven status in
SNB’s view
 May have plans of
purposely depreciating the
currency
 Forward rates indicate a coming
depreciation of the CHF vs. USD
 USD close to being stronger
than the CHF

• Demand for medication and treatments has never ceased
increasing.
• Inelastic demand making the play secure.
• Novartis keeps investing almost $10 billion a year in R&D.
• Confident that the company will beat earnings estimates
(Unfortunately, it did not…).
• Novartis recently acquired Admune, a company specialized in
cancer research and signed important licensing agreements with
XOMA and Palobiofarma.
• Our team needs to recover from 10% loss on portfolio value using
less risky investments leaving room for wild cards after the
midterm.

(in millions) Spot at 10/26/15:
USD=CHF 0.98346
USD CHF
2014 Revenue 58,000 57,041
Continuing Operations:
Pharmaceuticals 31,800 31,274
Alcon 10,800 10,621
Sandoz 9,600 9,441
Discontinuing Operations:
Vaccines 1,500 1,475
Consumer Health 4,300 4,229
2014 R&D Spending 9,900 9,736
2014 Number of Employees 133,413
48%
19%
21%
5%
7%
Employee Repartition
Pharmaceuticals
Alcon
Sandoz
Vaccines
Consumer Health
CEO: Joseph Jimenez Headquarters: Basel, Switzerland
Major Sites Major Production Sites
Where is Novartis
implanted?

The Other Company
(in millions) Spot at
10/26/15: USD=CHF 0.98346
USD CHF
2014 Revenue 48,260 47,462
Continuing Operations:
Pharmaceuticals 37,313 36,696
Diagnostics Division 10,947 10,766
2014 R&D Spending 9,063 8,913
2014 Number of Employees 88,509
65%
35%
Employee Repartition
Pharmaceuticals
Diagnostics Division
CEO: Severin Schwan Headquarters: Basel, Switzerland
Present in more
than 150
countries. Many
projects in Africa.

Remember?
Cramps for both Swiss
stocks due to currency
volatility.

Converted to $ using Spot
(10/26/15):
USD=CHF 0.98346
NOVN.VX ROG.VX BAYX.N PFE Industry
Market Cap: $ 245.96 B $ 235.31 B $ 108.26 B $ 220.75 B $ 2.28 B
Employees: 133,000 88,510 117,800 78,300 603
Revenue Growth (yoy change): 1.74 % 1.46 % 5.18 % (3.84 %) n/a
Revenue (ttm): $ 52.28 B $ 48.88 B $ 50.15 B $ 48.66 B $ 0.51 B
Gross Margin (ttm): 66.56 % 71.23 % 53.23 % 81.26 % 58.00 %
Net Profit Margin (ttm): 18.77 % 19.02 % 7.73 % 18.56 % n/a
Net Income (ttm): $ 9.79 B $ 9.10 B $ 3.85 B $ 9.00 B n/a
Cap Ex (5 year growth rate): 4.49 % 0.70 % 8.53 % 5.61 % n/a
EPS (ttm): $ 8.07 $ 10.55 $ 4.31 $ 1.43 $ 0.32
P/E (ttm): 22.99 25.81 28.12 25.14 25.12
Receivables Turnover (ttm): 5.71 5.76 4.40 4.98 n/a
P/S (ttm): 4.70 4.81 2.16 4.54 3.93
Novartis and Roche have
grown their revenues at a
very slow pace. Bayer
outperforms its competitors
here while Pfizer has
experienced turbulence.
Gross margins are higher
than most sectors. Pfizer is
the king of the industry
thanks to a good cost
management system.
Profit Margins are also jaw-
dropping even though Bayer
is much less profitable than
its peers. Partially due to
some patents expiring.
P/E for the industry and
these companies are above
20. They are therefore
places to invest. However,
interests risk-averse
investors.

RRR = 0.08% + (8.70% - 0.08%) x 0.91 = 7.92%
ERR1 = 5.80% + 2.67% = 8.47%
ERR2 = 10.90% + 2.67% = 13.57%
ERR3 = -1.50% + 2.67% = 1.17%
RRR = 0.08% + (8.70% - 0.08%) x 0.91 = 7.92%
ERR1 = 2.57% + 1.00% = 3.57%
ERR2 = 5.96% + 1.00% = 6.96%
ERR3 = 16.70% + 1.00% = 17.70%
Dividend
Rate:
1.00%
Dividend
Rate:
2.67%

Return
Risk
Krf = 0.08%
Km = 8.70%
ERR3 =17.70%
BUY side
SELL side
RRR= 7.92%
ERR1 =8.47%
ERR3 = 1.17%
ERR2 = 6.96%
ERR2 =13.57%
ERR1 = 3.57%
β = 0.91 β = 1.00

• October 21st, 2015:
– Novartis AG acquires Admune, an American pharmaceutical company
specialized in Cancer research, it signs licensing agreements with
American company XOMA and Spanish company Palobiofarma.
• October 27th, 2015:
– Novartis AG declares earnings of $1.27 missing estimates of $1.31 on
revenue of $12.3 billion instead of $12.7 billion because the company
unexpectedly decided to pay-off a fine of $390 million covering for
obscure commissions (bribery). Meanwhile, the core figures of the
company have increased and are in line with company goals, which
resulted in not impacting the stock price too much.
• Q4 2015:
– One can remember that Christmas period is also good for the
pharmaceutical and healthcare businesses as temperature falls
“creates” more sicknesses to be healed. Demand up.

• Novartis missed earnings estimates because it cut a
$390 million deal fine using profits. The stock could
plummet as investors could expect more sanctions on
the company. Such lawsuits are common in this sector.
• China devalues its currency taking the price of the
stock down as China represents a main site for
Novartis.
• FDA or any other Drug approval body does not approve
the latest drugs in the pipeline driving the price of the
stock to the ground.
• The currency war intensifies and drives the stock down.

Did not touch
the lower band,
Bullish trend to
come.

Golden cross
announcing a
bullish trend.

Perfect time to sell – stock is overbought
Perfect time to buy – stock is underbought
Perfect time to buy or sell
RSI is in the average,
time for a move.

ONE currency future contract per International Stock.
Novartis AG  NOVN.VX is a Swiss stock.
CHF 125,000
Contract ÷
CHF 90.55
Share = 1,380 shares
Number of shares purchased
with one CHF Futures contract
NOVN.VX stock price
per share on
October 26th, 2015
at market close
Stocktrak Confirmation:
I had to sell 2 shares to equilibrate the equation as Stocktrak only lists the closing
price of the stock each day. The stock purchase was delayed till next day and went
through the new price of $90.55/share instead of $90.40/share.

Novartis Long Position
With edge:
Long 90.55 CHF 90.55 CHF 90.55 CHF
Sell 87.95 CHF 91.15 CHF 85.65 CHF
# of shares 1,380 1,380 1,380
Initial Investment CHF 124,959.00 CHF 124,959.00 CHF 124,959.00 CHF
Sold Amount 121,371.00 CHF 125,787.00 CHF 118,197.00 CHF
- Comission ($ 30.00) ($ 30.00) ($ 30.00)
+ Dividend - - -
Long on 10/26/15 10/26/15 11/13/15
Sold on 11/30/15 11/30/15 11/30/15
# of days 35 35 18
Total Gain/Loss (3,618.00 CHF) 798,00 CHF -6 792,00 CHF
Return % (2.90%) 0.64% (5.44%)
Annualized return % (29.78%) 6.57% (108.71%)
Without hedge:
Exchange Rate at Buy CHF=USD 1.0213 CHF=USD 1.0213 CHF=USD 1.0213
Exchange Rate at Sell CHF=USD 0.9740 CHF=USD 0.9740 CHF=USD 0.9740
$ Investment Beginning ($ 127,620.63) ($ 127,620.63) ($ 127,620.63)
$ Inestment End $ 118,215.35 $ 122,516.54 $ 115,123.88
Gain / Loss ($ 9,405.27) ($ 5,104.09) ($ 12 496.75)
USD return % witout hedge (7.37%) (4.00%) (9.79%)
USD Return % with hedge (2.88%) (0.49%) (5.31%)
Gain with CHF Position $ 5,725.00 $ 5,725.00 $ 5,725.00
Final Total Gain / Loss ($ 3,680.27) $ 620.91 ($ 6,771.75)
• Pfizer $160B deal with Allergan
rumours.
• Earnings that missed estimates
amortized by encouraging core
numbers.
• Chinese market conditions 
decrease revenues.

Worst Case
85.65 CHF/share
(8.77%) return
11/13/15
Best Case
91.15 CHF/share
0.65% return
10/26/15
Bought
90.55 CHF/share
0.00% return
10/26/15
Sold
87.95 CHF/share
(2.88%) return
11/30/15

0.80%
26.70%
72.50%
GDP composition by sector
Agriculture Industy Services
Switzerland economic overview
Unemployment 3.2%
GDP $712.1 billion
GDP per capita $58, 100
Interest rate -0.75%
Inflation -1.4%

Bearish market
http://www.barchart.com/snapopinion/futures/S6Z15
No buy signal
No buy signal

SW / Z5
Currency ticker
Expiration date
Dec 2015
CHF/USD DEC 15

http://www.barchart.com/snapopinion/futures/S6Z15

Here are the key points about the Treynor ratio:- Measures risk-adjusted performance relative to market risk (beta)- Calculated as (portfolio return - risk-free rate) / portfolio beta - Higher ratio indicates better returns per unit of systematic risk- Used to compare investments or funds with different betas- Helps evaluate if excess return justifies volatility relative to benchmark- T. Rowe Price Growth Stock Fund has a higher 5-year Treynor ratio than benchmark, indicating better risk-adjusted returns relative to market movements.So in summary, the Treynor ratio is useful for comparing investments based on how much return is generated for the amount of market risk taken on. PR

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