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Turbo Warrants allow investors to bet on rising or falling prices. The lever ensures disproportionate participation.
Turbo Warrants offer a strong leverage effect with a low capital investment. They combine the advantages of Warrants and futures without their disadvantages. Volatility plays a minor role, and the price is easy to understand. The maximum loss is limited to the capital invested, with no obligation to make additional contributions.
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Leverage works both ways
The leverage effect enables above-average profits, but can also lead to leveraged losses.
Total loss in the event of a knock-out event
If the knock-out barrier is reached, Turbo Warrants immediately expire with no value, resulting in a total loss of the capital invested.
Open End Turbo Warrants are a further development of classic Turbo Warrants without a term limit. Investors can participate in the performance of an underlying asset on a leveraged basis for an unlimited period. The basic structure remains identical: Only a fraction of the price is invested; the rest is financed by the issuer. The knock-out barrier corresponds to the strike. If touched, the product immediately expires with no value.
The financing costs for Open End Turbo Warrants are adjusted daily, as there is no fixed expiration date. In the case of the Open End Turbo Call Warrant, the issuer increases the knock-out barrier daily using the pro rata financing costs, which reduces the value of the product daily. In the case of Open End Turbo Put Warrants, financing income could theoretically arise if the issuer’s interest income is higher than the financing margin. In practice, the margin is usually higher, which leads to a daily reduction in the knock-out barrier and thus to a reduction in the value of the product.
In the case of Open End Turbo Warrants, expected dividends cannot be taken into account in advance. On the ex-date, the strike of both Open End Turbo Call and Open End Turbo Put Warrants is adjusted downward by a certain percentage of the gross dividend. This percentage, the dividend factor, reflects the possible taxation. As a result, the dividend distribution remains value-neutral for Open End Turbo Warrants.
Turbo Put Warrants and Open End Turbo Put Warrants are ideal for the efficient and cost-effective hedging of a custody account or certain portfolio components, such as index investments. The principle is simple: A Turbo Put Warrant is added to the portfolio. If the position to be hedged loses value, the leverage product largely offsets these losses.
Example: To hedge an SMI index investment worth CHF 50,000 with a leverage of 10, CHF 5,000 must be invested in the Turbo Put Warrant. CHF 2,500 is enough to hedge half of the position. This method also makes sense in the short term, as the transaction costs are lower than when selling the position.
One advantage is that the hedge takes effect immediately after purchase. However, the stake is lost if the underlying asset rises and the knock-out barrier is touched. This risk can be reduced through lower leverage or a higher strike, but this requires a higher capital investment. In the case of Turbo Warrants with expiry, the duration of the hedge must also be taken into account.
Take advantage of the opportunities offered by leverage products and maximize your market opportunities.
Turbo Warrants are versatile investment instruments that offer investors access to equities, indices, commodities and currencies with a low capital investment. The lever enables disproportionately high profits, both when prices rise (Turbo Call) and when prices fall (Turbo Put). Daily stock exchange trading provides flexibility to adjust positions. Risks are transparent: if the price moves incorrectly, there is a risk of disproportionately high losses; in the case of knock-outs, the product expires with no value. Turbo Warrants are suitable for experienced investors who are willing to take risks and who monitor the markets on an ongoing basis.
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