Leveraged securities: The power boostersGreater opportunities, higher risks: Using leveraged securities you can amplify price movements.
Three reasons for choosing leveraged securities
- Disproportionately high gains are possible with lower capital commitment than with a direct investment.
- You are interested in oil, gold and the like? With leveraged products you can invest in a security rather than physically in the commodity – it’s simpler and cheaper.
- Depending on what you expect the market to do, you can opt for call instruments and bet on the markets rising or put instruments that bank on them falling.
Winner and loser
Adjusting the levers
Leveraged products are securitized derivatives, meaning they refer to an underlying asset. In other words, they depend, as the word ‘derivative’ infers, on the price of a certain equity or index.
Leveraged products differ significantly from investment products in terms of the risk/return profile. They are suitable for investors more willing to take risks, as the leverage effect means you can lock into the performance of the underlying asset to an above-average extent with high profits – as long as it goes in the direction you expect. If not, the investment may be lost in its entirety.
The lever serves as the power booster: It defines in what relationship an instrument tracks the price movements of the underlying asset. Or, to put it differently, by what factor the value of the product increases or decreases if the underlying asset rises or falls.
For example, if the price of an equity rises by one percent, you could gain five times the profit if you had opted for factor-five leverage. The leverage arises by investing less capital compared to the underlying asset.
Large range of products offering diverse investment opportunities
The three most popular leveraged securities are warrants, knock-out products and Factor Certificates. Through Börse Stuttgart you can trade a multiplicity of leveraged products simply and flexibly from 8 a.m. to 10 p.m. Our trading experts contribute decisively to the quality of buy and sell prices. A better price considerably boosts the overall performance in particular of short-term investments.