Equity Blue

The previous article described how it is possible to buy various certificates and structured instruments. Let’s have a look today how the price of exchange traded instruments is set. The basic exchange traded instruments are, of course, stocks and equities of various enterprises. The classical way of trading stocks is that a potential buyer meets a potential seller on an exchange. Nowadays all the trading activity is, of course, performed electronically through designated brokerage companies. In other words, a buyer initiates a buy order, which has its prerequisites, such as the price limit, number of shares, and other specific signs. The brokerage company, through which the order is placed, is then routing the order to the stock exchange. If there is simultaneously a corresponding sell order at the exchange, which has similar signs, then the orders are matched and the deal gets closed and settled. The price, for which the trade was closed, is being considered valid. Logically, if th...

In the previous article the Exchange in Stuttgart (“the Boerse Stuttgart”) was introduced. It is definitely the most significant exchange in terms of trading certificates and structured products. Another very significant exchange for trading these instruments is in Frankfurt (“the Boerse Frankufurt”), and famous exchange is as well the SIX Structured Products Exchange AG (formerly known as Scoach Schweiz AG, among traders familiarly called “Scoach”), which is based in Switzerland. The mentioned exchanges offer certificates and structured products trading to all groups of investors, i.e. institutional investors, such as mutual and pension funds, insurance companies, banks, investment houses, etc., and private and retail investors. For illustration only  (Source: Boerse  Stuttgart, www.boerse-stuttgart.de) Nevertheless, how to buy and sell certificates at exchanges? Seen from the perspective of a private investor, it is first essential to open up an account with an...

It was already mentioned in one of the previous articles that the Europe’s and the World’s biggest market for investment certificates is in Germany. Majority of issuers of certificates are based in Germany, and there are as well specialized platforms and exchanges for certificates trading. Thanks to those exchanges certificates are well accessible to a wide investment audience and public, and trading with these instruments is technically non-complicated, cheap, and fast. Among the main certificate markets in Germany belong the exchanges in Stuttgart and in Frankfurt. Let’s have a more detailed look at the Stuttgart Stock Exchange , which belongs in the field of certificates trading to the absolute top. Traders highly value the exchange’s level of liquidity, high quality of instruments’ price setting procedures, a range of intelligent order types, wide range of provided market information, and many more interesting features. Shortly about the history The hearquarter of the B...

After the review of capital protection structured instruments and certificates without capital protection let’s look at the last group of structured products. The last group contains certificates that take full advantage of the leverage effect. Generally, these certificates belong to the riskiest instruments within the structured products universe. For a better understanding of these instruments it is necessary to make a short introduction to the topic of financial leverage. Shortly about the Leverage Effect What is leverage and how does it work? The idea behind leverage is to use a “smaller” amount of own funds together with a much larger sum of borrowed funds. The total amount is then invested. By this mechanism it is possible to generate huge profits, but potentially as well losses. The ultimate goal of leverage is, therefore, significant increase of profits. Realized profit is always measured against own invested funds. By leveraging any investment it is therefore possib...

The purpose of the previous article was to provide a short description of the first group of certificates without capital protection, i.e. credit linked notes, reverse convertibles, discount and express certificates. The second group of these instruments includes bonus, index, outperformance and sprint certificates. Let’s review their functionalities. Bonus Certificates Bonus certificates belong to instruments that allow its investors to generate an above-average yield in a form of a bonus. The yield can be generated as well in case of a moderate decrease of the price of the underlying asset, i.e. stock, basket of stocks, stock index, commodity, etc. By a moderate decrease of the price of the underlying asset is meant the space between the actual price and the value of the so-called safety barrier, which is always strictly set. The value of the safety barrier is one of the basic parameters of each bonus certificate. A bonus certificate has similarly as other certificates a gi...