Types of knock-out certificates
First of all, the type of a turbo certificate always depends on whether an investor is betting on falling prices or rising prices based on the price of the underlying asset. But the timing of the knock-out certificates also plays a role. There are therefore four types in total, which we will look at below:
- Long Knock Out Certificates
- Short knock-out certificates
- Shortened knock-out periods
- Extended knock-out periods
In addition, knock out certificates are further subdivided as follows:
- Open End Turbos
- Mini Future Certificate
- Smart Mini Future
- X Open End Turbos
- X Turbos
- Type Call or Put
Long Knock Out Certificates
Long knock-out certificates are also known as knock-out calls. The leverage of the certificates always depends on the current price of the underlying and the strike price. In the case of knock outs, the strike price is also referred to as the strike. The logical conclusion is therefore that the higher the strike price, the higher the leverage. The strike can therefore also be referred to as the knock-out threshold. Small reminder: If the knock-out threshold is reached, it is a total loss for the investor.
If you decide to go long, the underlying increases daily. The intrinsic value of the product therefore decreases and the risk increases in equal measure. When buying a knock-out call, investors speculate on a rise in prices.
Short Knock Out Certificates
The opposite is the case with short knock-out certificates. These are also known as knock-out puts. With this variant, investors use https://exness-ar.com/login/ to bet on falling prices based on the price of the underlying and not, as with the knock-out call, on rising prices. The underlying asset therefore falls from day to day.
With most knock-out certificates, you have the choice of setting a stop loss for both long and short trading and thus hedging your own capital.
Shortened and extended knock-out periods
The duration of a certificate also determines its type. Therefore, there is also the possibility to trade long or short knock out certificates in the Turbo in the Smart Turbo or in the X Turbo.
A Smart Turbo is a shortening of the knock-out times. This can be profitable for investors because you enjoy a certain degree of protection. Here, only the closing price of a day counts. It can therefore happen that the knock-out threshold is exceeded on the day. However, if the closing price neutralises again and does not exceed the knock-out threshold, you do not suffer a total loss. This means that intraday fluctuations have no effect on your certificate. If the closing price exceeds the knock-out threshold, the certificate expires and not before. This variant is therefore not suitable for day traders, but for all other investors.
With the X Turbo, basically the opposite happens. The term of a knock out is extended here. This means that you can bring about a knock out beyond the usual trading hours. Therefore, this variant is especially interesting for intraday traders.