Deutsche Bank: Buy Puts as Market Drivers Fade
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Deutsche Bank strategists Maximilian Uleer, Carolin Raab, and Francesca Mazzali told clients in a Monday note to buy out-of-the-money puts as insurance against a major correction, citing mounting tail risks and a rising probability of an extreme market event.
- The two pillars propelling equity markets — a strong Q1 U.S. reporting season and expectations of Middle East de-escalation — are losing momentum, and no fresh drivers have emerged to replace them.
- Nvidia (NVDA), the last major company to report Q1 results, was set to release earnings Wednesday; Uleer said the positive impact of the earnings season dissipates after that print.
- The U.S.-Iran impasse over the Strait of Hormuz remains unresolved; while military violence has subsided since early March, the Strait remains effectively closed, and Uleer's model shows one more quarter of impasse would nearly wipe out potential equity upside.
- Ambiguous comments about Taiwan's future following the Trump-Xi summit add a separate tail risk, given Taiwan's role as the world's most important semiconductor hub.
- Deutsche Bank's proprietary 'pressure index' — an equally-weighted measure of 20-day changes in the S&P 500, 10-year U.S. Treasury yield, presidential approval rating, and 1-year inflation forward — is beginning to edge higher.
- Uleer noted that put-option volatility pricing keeps the recommended insurance relatively affordable at current levels.
Why it matters: Deutsche Bank's prescription targets a market where the Q1 earnings rally's last major catalyst — Nvidia's Wednesday report — and any hope of a Strait of Hormuz reopening are both about to be tested simultaneously, with DB's pressure index already climbing. For hedgers, the window matters: Uleer explicitly says put premiums have not yet spiked, meaning insurance is still cheap relative to the escalating risks the bank models.
