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Tutorial: Turbos

What are Turbos?

Turbos (issued as warrants or certificates) allow you to benefit from market fluctuations in both ways. Turbos Long benefit from rising prices, Turbos Short from falling ones. Every incremental movement in the price of the underlying may lead to disproportionately high returns due to the leverage effect. However, while the unlimited upward potential is the upside of this particular product, the risk of losing the entire capital invested if the set barrier has been broken is its downside. In the case of Turbos Long the barrier is set below the current price of the underlying. Turbos Short will have the barrier set above the current price of the underlying. There are Turbos with and without maturity date ("open-end Turbos").

How do Turbos work?

Turbos come with an inbuilt leverage effect. The price movements of the underlying are reflected relatively independent of volatility. If the price of the underlying instrument rises, the price of the Turbo Long/Short rises/falls according to the chosen leverage at a disproportionate level. The leverage effect results from the lower purchase price of a Turbo relative to the direct investment in the underlying. The lower the purchase price of the Turbo, the bigger the leverage.

Turbos have a strike (base) price and a barrier. The intrinsic value of the Turbo is the difference of the share price and the strike price (Turbo Long) or the difference between the strike price and the share price (Turbo Short), respectively.

Your benefits

A Turbo is the ideal instrument for active, market-oriented investors to benefit from short-term market fluctuations with a leverage effect. There is a vast array of products available both for rising (Turbo Long) and for falling (Turbo Short) prices. The Turbo Short is therefore one of the few instruments on the equity market that gives you the chance to benefit from falling markets.

Your advantages

  • Your return potential is disproportionately high due to low capital investment and the leverage effect.
  • With Turbos Long you benefit from rising prices, with Turbos Short from falling ones.
  • The influence of time value and volatility is very low.

Details you should be aware of

  • You may lose your entire investment.

How do Turbos react to…

… rising markets?
In rising markets the price of Turbos Long/Short rises/falls at a disproportionately high level in accordance with the leverage chosen.

… stable markets?
In stable markets, the price of Turbos is influenced by the financing costs. They fall/rise over time, which means that you may incur losses in the case of Turbos Long and post gains if you hold Turbos Short.

… falling markets?
In falling markets the price of Turbos Long/Short falls/rises at a disproportionately high level in accordance with the leverage chosen.


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