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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.


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