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Tutorial: Turbo long/short

What are Turbo long/short?

Turbo long/short allow you to benefit from market fluctuations in both ways. Turbo long benefit from rising prices, Turbo 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 Turbo long the barrier is set below the current price of the underlying. Turbo short will have the barrier set above the current price of the underlying. There are turbo products with a fixed maturity date, and turbo products with no fixed maturity date.

How do Turbo long/short work?

What applies to share, index, commodity, FX Turbo open end certificates:

Price of turbo long certificate in the currency of the underlying asset = (the price of the underlying asset – the Strike value) x Multiplier
Price of turbo short certificate in the currency of the underlying asset = (the Strike value - the price of the underlying asset) x Multiplier

• If the price of the underlying asset rises, the price of TURBO LONG/SHORT rises/falls depending on the size of the leverage.
• If the client buys a TURBO LONG at the moment when the leverage has value of 10 and the price of the underlying subsequently increases by 1% (in case of unchanged Strike value), the price of the certificate in the currency of the underlying asset will increase by approximately 10%. If, after the purchase of a certificate, the price of the underlying subsequently falls by 1% (in case of unchanged Strike value), the price of the certificate in the currency of the underlying asset will fall by approximately 10%.
• TURBO LONG/SHORT certificates have a fixed realisation price (so-called Strike value) and knock-out barrier (long/short). The Strike value and knock-out barrier are continuously regulated by daily financing costs. The price of the certificate does not contain the financing costs.
• The actual value of the certificate is the difference between the price of the underlying asset and the Strike value (TURBO LONG) or the difference between the Strike value and price of the underlying asset (TURBO SHORT).
• As soon as the price of the underlying asset reaches the pre-set barrier (long barrier/short barrier, or “knock-out barrier”), TURBO LONG/SHORT certificates become worthless or only the residual value can be paid out to the holder.

What applies to share Turbo certificates:
The payout of the dividend of the underlying share has almost no effect on the certificate price. On the so-called ex-dividend date, the price of the share falls (i.e. of the underlying asset of the certificate) by the level of the dividend and the Strike value and knock-out barrier also fall by the level of the dividend.

The following applies to commodity turbo certificates for gold or silver:

If the underlying asset is the gold/silver spot price
• There is no roll-over or rolling of contracts
• The reference price for observing knock-out barriers is the quotation of gold/silver spot prices

If the underlying asset is the gold/silver futures contract
the certificate always observes the nearest gold/silver futures contract on the COMEX - New York Commodities Exchange. Of course, the Certificate has an unlimited maturity date. Therefore, there has to be regularly done so called a roll-over or rolling of contracts just before the expiry of the nearest futures contract. Rolling means that the expiring futures contract is sold and the next nearest futures contract is bought. The knock-out barrier or STRIKE price may change or usually changes during the rolling.
Simply speaking, the knock-out barrier and Strike prices are regulated so that the distance between the price of the new futures contract and new Strike price (knock-out barrier respectively) remains the same as the distance between the price of the old futures contract and the old Strike price (knock-out-barrier respectively). There is a precise description in the Final Terms of the individual Certificate.
• The reference price for observing the knock-out barrier is the final price of trading the futures contract on the stock exchange.

What applies to WTI / BRENT CRUDE / NATURAL GAS Turbo certificates:
The certificate always monitors the nearest WTI / BRENT CRUDE / NATURAL GAS futures contract on the NYMEX/ICE / NYMEX. Of course, the certificate has unlimited maturity.
Thus, the roll-over or “rolling” of the contracts must take place regularly every month shortly before the expiry of the nearest futures contract.
Roll-over usually takes place three to ten working days before expiration, but can be performed earlier by using the parameters set out in the Final Terms.
Roll-over means that an expiring futures contract is sold and the next nearest futures contract is bought.
There may be or usually is a change in the knock-out barrier and STRIKE valuer during roll-over.
Simply speaking, the values of the knock-out barriers and Strike are regulated so the difference between the new futures contract and new Strike (knock-out barrier respectively) value remains the same as the difference between the price of the old futures contract and old Strike (knock-out barrier) value. An accurate description is provided in the Final Terms of the individual certificate.

The rule for E-mini S&P500/E-mini DJI turbo certificates is that:
The certificate always monitors the nearest e-mini S&P500 / e-mini DJI futures contract on the CME/CBOT. Of course, the certificate has an unlimited maturity date. Therefore, there must be a roll-over or rolling of contracts on a regular basis every month just before the expiry of the nearest futures contract. The roll-over takes place usually three to ten working days before the expiry, but can take place even earlier within the parameters laid down in the Final Terms.
Rolling means that an expiring futures contract is sold and the very nearest futures contract is purchased. A change in knock-out barriers and STRIKE prices can and usually arises during rolling.
In simple terms, knock-our barriers and Strike prices are adjusted so the gap between the price of a new futures contract and the new Strike price (knock-out barrier respectively) remains the same as the gap between the price of the old futures contract and the old Strike price (knock-out barrier respectively). An accurate description is presented in the Final Terms of each individual certificate.

Your advantages

  • Your return potential is disproportionately high due to low capital investment and the leverage effect.
  • A wide range of products is available for both rising prices (turbo long) and falling prices (turbo short).
  • With a turbo long you benefit from rising prices, while with a turbo short you benefit from falling prices.
  • Turbo long/short is an ideal tool for active, market-oriented investors, who can profit from short-term market fluctuations thanks to the leverage effect.
  • Turbo short is therefore one of the few tools in the stock market that allows you to benefit from falling markets.

Details you should be aware of

  • Leverage effect can result in disproportionately high losses and you may lose your entire investment.
  • If the product is not hedged against currency risk, its performance is positively or negatively affected by the development of the exchange rate between the currency of the product (CZK) and the currency in which its underlying asset is traded. If the CZK strengthens, the price falls, if the CZK weakens, the price rises.
  • An investor should not base his investment decision solely on this document, as he may be outside the target market of the investment instrument and the investment instrument listed in this document may not be suitable for all investors.
  • The investors bear the risk of issuer (Erste Group Bank AG).

How do Turbo long/short react to…

… rising markets?
In rising markets the price of Turbo long/short rises/falls at a disproportionately high level in accordance with the leverage chosen.

… stable markets?
In stable markets, the price of Turbo products is influenced by the financing costs, which could decrease or increase it´s price.

… falling markets?
In falling markets the price of Turbo long/short falls/rises at a disproportionately high level in accordance with the leverage chosen.


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