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ABN AMRO Turbos Well prepared active investing

ABN AMRO Turbos Well prepared active investing. Agenda. Turbo Basics The ABN AMRO Turbo The most important characteristics of a Turbo Turbo vs. Options vs. Sprinters vs. Turbo Trading and costs The most important risks What makes the ABN AMRO Turbo unique? Turbo Advanced

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ABN AMRO Turbos Well prepared active investing

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  1. ABN AMRO TurbosWell prepared active investing

  2. Agenda Turbo Basics • The ABN AMRO Turbo • The most important characteristics of a Turbo • Turbo vs. Options vs. Sprinters vs. Turbo • Trading and costs • The most important risks • What makes the ABN AMRO Turbo unique? Turbo Advanced • Hedging with Turbos • Stock portfolio • Currency exposure

  3. Turbo Basics: The ABN AMRO Turbo

  4. The ABN AMRO Turbo • The ABN AMRO Turbo is an investment product that offers investors an ability to: • Invest with a personal vision • Invest at a personal acceleration • Invest in a personal market of choice

  5. The ABN AMRO Turbo • Internationally known as mini-futures • Originally ABN AMRO product allocated to RBS • The new Turbo re-launched by the new ABN AMRO • Used for both investment and hedging purposes 5

  6. The ABN AMRO Turbo • Live since October 2010 • More than 1000 Turbo’s live • Covering approximately 111 underlying values • Across 5 asset classes • Euro denominated and exchange traded on Euronext Amsterdam • Second in market share turnover in the Netherlands 6

  7. Turbo Basics: What are the most important characteristics of a Turbo?

  8. The most important characteristics • Leverage effect • Financing level • The value • Stop loss-level • Salvage value

  9. Return Underlying = 20% Return Turbo Long = 100% The leverage effect Theleverage effectcauses the value of a Turbo to fluctuate at a faster rate than the value of the underlying. This is animportant characteristicof Turbos. Example Turbo Long leverage rate 5 EUR 30 EUR 10 EUR 25 EUR 5 Underlying Turbo Long

  10. The leverage rate • Theleverage rateindicates how much faster the value of a Turbo accelerates compared to the value of the underlying. • The higher the leverage rate, the greater the change in response to a movement in the underlying, bothpositive and negative. 8% (4 x 2%) 60% (6 x 10%) 60% (10 x 6%) 135% (15 x 9%) 100% (25 x 4%)

  11. The leverage rate Theleverage ratedepends on the price of the underlying at the time of purchase (reference price) and on the financing level of the Turbo: Reference price of underlying (Reference price of underlying – Financing level) Leverage rate Turbo Long = Reference price of underlying (Financing level – Reference price of underlying) Leverage rate Turbo Short =

  12. Example: The leverage rate • Leverage rate Turbo Long • Reference price of underlying EUR 15 • Financing level Turbo Long EUR 10 • Leverage rate Turbo Long = Reference price / (Reference price – Financing level) • = EUR 15 / (EUR 15 – EUR 10) • = 3 • Leverage rate Turbo Short • Reference price of underlying EUR 20 • Financing level Turbo Short EUR 25 • Leverage rate Turbo Short = Reference price / (Financing level – Reference price) • = EUR 20 / (EUR 25 – EUR 20) • = 4

  13. The leverage rate • Because the reference price of an underlying changes continuously, the leverage rate of a Turbo can only be set when it is acquired. • Once the Turbo has been acquired, the leverage rate will remain constant for the investment period, assuming a constant financing level.

  14. Leverage rate and financing level The leverage effect is enabled by thefinancing level: Financing level Turbo Short Financing level Turbo Long • A Turbo Shortcan be compared withthe saleof the underlying, for which the bank will take ashort positionfor the investor in the underlying. • To cover the risks of a short position, the investor is requested to make adeposit (value of the Turbo) • The investor generally receives interest over the combined sumof the value of the Turbo and the proceeds of the short position • The amount over which the interest is calculated, is called thefinancing level of a Turbo Short • A Turbo Longcan be compared withthe purchaseof an underlying, but the investor invest onlya fractionof the value of the underlying. • Theremaining amountwill be provided for by the bank, over which the investor pays financing interest • The amount over which the interest is calculated, is called thefinancing level of a Turbo Long

  15. The value of a Turbo Thevalueof a Turbo is in most cases equal to the difference between the price of the underlying and the financing level Value Turbo Long= Price of underlying – Financing level Value Turbo Short= Financing level – Price of underlying

  16. Example: the value of a Turbo Long • Example 1 • Price of underlying EUR 15 • Financing level EUR 10 • Value Turbo Long = Price of underlying – Financing level • = EUR 15 – EUR 10 • = EUR 5 • Example 2 • Price underlying EUR 18 • Financing level EUR 10 • Value Turbo Long = Price of underlying – Financing level • = EUR 18 – EUR 10 • = EUR 8 €10 €8 €5 €18 €15 Price of underlying TL Financing level TL Value

  17. Example: the value of a Turbo Short • Example 1 • Price of underlying EUR 15 • Financing level EUR 20 • Value Turbo Short = Financing level – Price of underlying • = EUR 20 – EUR 15 • = EUR 5 • Example 2 • Price of underlying EUR 12 • Financing level EUR 20 • Value Turbo Short = Financing level – Price of underlying • = EUR 20 – EUR 12 • = EUR 8 €20 €15 €8 €5 €12 TS Financing level Price of underlying TS Value

  18. Ratio and exchange rate In certain cases, investors should also take aratioand anexchange rateinto consideration when calculating the value of a Turbo.

  19. The ratio of a Turbo Theratioindicates how many Turbos an investor would normally have to acquire in order to be fully invested in the underlying: • A Turbo with aratio of 1, means that an investor will have to acquire 1 Turbo in order to be fully invested in the underlying. • A Turbo with aratio of 10, means that an investor will have to acquire 10 Turbos in order to be fully invested in the underlying. • A Turbo with a ratio of 0.1, means that an investor will have to acquire ‘0.1 Turbos’ in order to be fully invested in the underlying. One Turbo thereby gives an entitlement of 10 in the underlying • A Turbo with a ratio of 0.01, means that an investor will have to acquire ‘0.01 Turbos’ in order to be fully invested in the underlying. One Turbo thereby gives an entitlement of 100 in the underlying

  20. The exchange rate effect ABN AMRO Turbos arelisted in euros. Some underlyings values may, however, be listed in another currency. To calculate the value of a Turbo on such underlyings, investors should take theexchange rateinto consideration: • Anincreasein the value of the underlying currency versus the euro can have apositive effecton the value of the Turbo. • A decreasein the value of the underlying currency versus the euro can have anegative effecton the value of the Turbo.

  21. The value of a Turbo with ratio & exchange rate When theratioandexchange rateare taken into consideration, the value of a Turbo can be calculated as follows: (Price of underlying – Financing level) (Ratio x Exchange rate) Value Turbo Long = (Financing level – Price of underlying) (Ratio x Exchange rate) Value Turbo Short =

  22. Example: The value of a Turbo with ratio & FX • Value Turbo Long • Price of underlying USD 360 • Financinglevel Turbo Long USD 295 • Ratio 10 • EUR/USD exchange rate 1.40 • Value Turbo Long = (Price of underlying – Financing level) / (ratio x exchange rate) • = (USD 360 – USD 295) / (10 x 1.40) • = EUR 4.64 • Value Turbo Short • Price of underlying USD 2800 • Financinglevel Turbo Short USD 3500 • Ratio 100 • EUR/USD exchange rate 1.40 • Value Turbo Short = (Financing level – Price of underlying) / (ratio x exchange rate) • = (USD 3500 – USD 2800) / (100 x 1.40) • = EUR 5

  23. Stop loss-level and salvage value • Turbos areopen-endedinvestment instruments and as such Turbos do not have a maturity date. • However, each Turbo has astop loss-level, which ensures that an investor can never lose more than the initial investment. • When the stop loss-level has been reached, the Turbo will be terminated and the position in the Turbo will be liquidated. • In most cases, investors will receive asalvage value. • The salvage value is equal to the difference between the financing level and theaverage priceat which the Turbo is liquidated, taking the ratio and exchange rate into consideration.

  24. Adjustments to the financing- and stop loss-level PLEASE NOTE- the financing level and stop loss-level can change due to any of the following factors: • Adjustments for thefinancing costsand –revenues • Adjustments for the effect ofdividend • Adjustments for the effect offutures • Adjustments for the effect corporate actions (example: stock split)

  25. To summarize: Theleverage effectcauses the value of a Turbo to fluctuate at a faster rate than the value of the underlying The leverage rate comes into existence because a client invests only a fraction of the underlying, while the remainder is financed by ABN AMRO The value of a Turbo can be calculated directly from the value of the underlying and the financing level The stop loss-level ensures that an investor can never lose more than the initial investment 25

  26. www.abnamromarkets.nl/turbo

  27. Turbo Basics: Turbo vs. Options vs. Sprinters vs. Turbo 27

  28. Turbo vs. Option 28

  29. Turbo vs. Sprinter vs. Turbo 29

  30. Turbo Basics: How can Turbos be traded and what are the costs?

  31. Liquidity of ABN AMRO Turbos • ABN AMRO Turbos are listed onEuronext Amsterdamby NYSE Euronext. • Turbos can therefore be traded during exchange hours, from09:05 to 17:30Central European Time (CET).

  32. Identifying ABN AMRO Turbos • ABN AMRO Turbos are identified by means of anISIN-code, which will remain unchanged during the life of the Turbo. Example 1: NL0009648187 Example 2: NL0009650753 • The nameof a Turbo furthermore indicates the underlying, the stop loss-level and whether it concerns a Turbo Long or Turbo Short. Example 1: ABN Apple TL 320 Example 2: ABN Apple TS 395

  33. Costs associated with Turbos The following costs may be associated with Turbos: • Spread: size of the spread is mainly linked to the liquidity of the underlying. • Financing costs: Financing costs and financing revenues are settled with the investor on a daily basis by adjusting the financing level with the cost or revenue amount. • Not applicable on intra-day positions. • Financing costs Turbo Long = O/N LIBOR + 2%; • Financing revenues Turbo Short = O/N LIBOR – 2% • Financing costs for both Turbos Long and Turbos Short on futures = 2% • Transaction costs: Depending on the bank or broker, investors may also be charged a transaction fee. • Taxes: The investor may be required to pay taxes over the Turbo investment that cannot be withheld by ABN AMRO.

  34. Turbo Basics: What are the most important risks of a Turbo?

  35. Most important risks • Turbos are high risk investment products that are only suitable forexperienced and active investors with a strong risk appetite. • Before investing in Turbos investors should beaware of, and fully understand, allthe risksinvolved with investing in this product, such as: • Leverage risk: An investment in Turbos contains a higher risk than a direct investment in an underlying because the leverage effect causes the value of the Turbo to fluctuate at a faster rate than the value of the underlying. • Stop loss risk: A Turbo may expire and become worthless if the stop-loss level has been hit or breached. In such cases, investors may suffer a total loss of the capital invested. • Exchange rate risk: The value of a Turbo may be influenced by fluctuations in the currency of denomination of the underlying, should this currency be different from that of the Turbo. • Liquidity risk: Investors may be unable to trade in a Turbo in the event of a malfunction in the trading system of Goldman Sachs, Euronext Amsterdam, or the exchange on which the underlying is traded. • Credit risk: Investors in ABN AMRO Turbos are exposed to the credit risk of ABN AMRO Bank N.V. • Please read the prospectus, supplements and final terms for a complete description of the risks involved with Turbo investments

  36. Turbo Basics: What makes the ABN AMRO Turbo unique?

  37. ABN AMRO Turbo Apps

  38. ABN AMRO Turbo Apps

  39. www.abnamromarkets.nl/turbo

  40. www.abnamromarkets.nl/turbo

  41. www.abnamromarkets.nl/turbo

  42. De ABN AMRO Turbo Tip

  43. Appendix

  44. Ajustments for financing costs and -revenues • Investors arecharged interestand a 2% feeover the financing level of aTurbo Long, also referred to asfinancing costs, by increasing the financing level of the Turbo Long on a daily basis. Assuming equal market circumstances, the value of a Turbo Long will slowly decrease. • Turbo Shortinvestors generallyreceive interestand are charged a 2% feeover the sum of the value of the Turbo and the short position, also known asfinancing revenues. These revenues are remunerated to the investor by increasing the financing level with these revenues daily.Assuming equal market circumstances, the value of a Turbo Short will slowly increase. • The stop-loss levelfor each Turbo is adjusted monthly to accommodate for changes in the financing level.

  45. Adjustments for the effect of dividends • Some underlyings issuedividends. Dividend payments will, under equal market circumstances, lead to a proportional decrease in the price of the underlying. • To keep thevalue of the Turbo dividend-neutral, the financing level of the affected Turbos will be adjusted by the net dividend before the opening of the exchange on the ex-dividend date. • For Turbos on Indices, the subtraction is done by the net amount, corrected for the weighting of the dividend-paying company in the Index. • To accommodate the changes in the financing level, thestop-loss levelwill also be adjusted on ex-dividend dates.

  46. Example: Adjustments for the effect of dividends • Dividend effect Turbo Long • Price of underlying EUR 15 • Financing level Turbo Long EUR 10 • Ratio 1 • Exchange rate not applicable • Value Turbo Long EUR 5 • Net dividend EUR 1 • Dividend effect Turbo Short • Price of underlying EUR 15 • Financing level Turbo Short EUR 22 • Ratio 1 • Exchange rate not applicable • Value Turbo Short EUR 7 • Net dividend EUR 1

  47. Example: Adjustments for the effect of dividends • Dividend effect Turbo Long • Price of underlying USD 360 • Financing level Turbo Long USD 320 • Ratio 10 • Exchange rate 1.40 • Value Turbo Long EUR 2.86 • Net dividend USD 3 • Dividend effect Turbo Short • Price of underlying USD 360 • Financing level Turbo Short USD 415 • Ratio 10 • Exchange rate 1.40 • Value Turbo Short EUR 3.93 • Net dividend EUR 3

  48. Adjustments for the effect of futures • Certain Turbos are issued with afuture contractas underlying. • Future contracts are standardized contracts between two parties to buy or sell a specified quantity of a specified asset at a specified future date at a price agreed today (the future price). • Future contracts are generallytraded at a discount or premiumto the spot priceof the underlying of the future contract: • Contangois a situation in which thefuture price exceeds the spot price, often due to the cost of storing and insuring the underlying • Backwardationis a market condition in which afuture price is lower in the distant delivery monthsthan in the near delivery months. This is said to occur due to insufficient supply in the corresponding spot market.

  49. Adjustments for the effect of futures • As expirationof the future contract approaches, the future price normally moves towards the spot price. • In abackwardation situation, one assumes that the future price willmove uptowards the spotprice.One can benefit from this expected movement by acquiring aTurbo Long • In acontango situation, one assumes that the future price willmove downtowards the spotprice. One can benefit from this expected movement by acquiring aTurbo Short Backwardation Contango Price Price Time Time

  50. Adjustments for the effect of futures • Futures have anexpiration date(strike date) on whichsettlement of the underlyingcontract is required through either physical delivery or cash settlement. • To prevent settlementof the underlying and to ensure continuation of the Turbo, future contracts arerolled prior to expirationby selling the expiring contract and acquiring the succeeding (most liquid) contract.* • Price differences may exist between futures with different strike dates when future contracts are rolled. • To keep the value of the Turbo neutral for potential price differences upon the future roll, it is possible that thefinancing levelandstop loss-levelof a Turbo on a future will be adjusted on the future roll date *The actual underlying future of a Turbo and the future roll-date can be found under product characteristics on www.abnamromarkets.nl/turbo

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