German lad in bellbottoms (4)

I believe the answer is:

otto

I'm a little stuck... Click here to teach me more about this clue!

'german' is the definition.
(common German name)

'lad in bellbottoms' is the wordplay.
'OTTO' is hidden in amongst the letters.
However, I'm uncertain how the hidden word is indicated.

Can you help me to learn more?

(Other definitions for otto that I've seen before include "Name of four German kings" , "Palindromic fragrance" , "Something essential" , "perfume maker" , "Palindromic German name like Bismark's" .)

I've seen this clue in The Everyman puzzle in The Observer.

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