Equity Blue

In the previous articles it was already mentioned that certificates are compiled of individual components. These components are mainly options. Options are so-called financial derivatives. They represent the right either to buy, or to sell a given amount of an underlying asset (stocks, stock indexes, currencies, interest rates, commodities, etc.) for a given price. This financial derivative is always having its maturity. An option with the right to buy the underlying asset is called “ Call ”, i.e. a call option. An option with the right to sell is called “ Put ”, i.e. a put option. The option’s right can be exercised either anytime within the option’s lifetime, i.e. the option is of a so-called American type, or it can be exercised only in its maturity, i.e. the option is of a so-called European type. For the purposes of constructions of bonus certificates only European type options are used, because the entitlement of bonus pay-out only arises in maturity of a bonus certificate. ...

As written in the previous articles, each and every investment certificate is assembled of individual components. Bonus certificates are not exceptional in this. By individual components we mean options, i.e. financial derivatives, which cater for different parameters of the particular certificate. They, for example, set the level of bonus, level of safety barrier, maturity, and potentially further characteristics. The total sum of the values of these components is setting the price of the bonus certificate. The same rules apply to bonus certificates as to any other investment instruments. The higher the yield of the certificate, the higher the risk associated with it. Therefore, keeping in mind the previous articles, the higher the bonus (yield) the certificate offers, the lesser is the safety pillow represented by the safety barrier, i.e. the difference between the actual price of the underlying asset and the given value of the safety barrier. The awareness of the above men...

In the recent article, that was meant to be an introduction to the topic of bonus certificates, I wrote about the principles and functionalities of these instruments. A bonus certificate is having at least three key parameters: maturity , bonus and the safety barrier . Nowadays, there are dozens of various bonus certificates that were issued with different underlying assets, different maturities, and differently set bonus and safety barriers levels. All these parameters must be taken into consideration when choosing the right certificate. The maturity of a certificate shall be quite clear. The maturity is defined by a given day, when the certificate gets redeemed, and the bonus gets paid out (if the price of the underlying asset did not fall on or below the level of safety barrier); or, in case the price of the underlying hit the safety barrier, then the value corresponding to the current price of the underlying is paid out. Therefore, the bonus represents the profit. However,...

Bonus certificates are undoubtedly very interesting investment instruments, which are appealing to many experienced investors. These instruments in their classical shape are enjoyed for their three main advantages: they provide a partial safety in case of falling market prices; they provide a chance to obtain a bonus in the maturity; and in case of a strong growth of the price of the underlying asset they even allow an unlimited participation on the profit. Many investors reached interesting yields thanks to the characteristics of bonus certificates. But it is as well necessary to mention that in case of deeply falling prices even these instruments can generate substantial losses. Nevertheless, if a potential investor realizes and understands the functionality of these instruments, and develops himself the ability to evaluate the parameters of the particular bonus certificate in connection with the price movements of the underlying asset, then the risk can be significantly reduced. T...

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...