A major strength of turbos is their transparent price development: they follow the movement of the underlying asset 1:1, taking into account the ratio. The performance of turbos therefore essentially depends on the price movements in the underlying. The underlying can be a share, an index, or a commodity. For example, the price of a turbo is 1 euro, and the underlying is quoted at 10 euros. If the price of the underlying asset now rises, for example, by one euro to 11 euros, the price of the turbo long also rises by one euro. The special feature of this product is therefore the leverage effect. The leverage illustrates the following: While the underlying has risen from 10 euros to 11 euros, i.e., by 10 percent, the increase in the Turbo is 100 percent, as it has risen from 1 euro to 2 euros - its leverage is thus ten. However, the leverage also works in the other direction: If the market expectation is not met, disproportionate price losses occur even before the total loss of invested money. It is therefore advisable to closely monitor the market.

Turbos offer the chance for high profits, but also have correspondingly higher risks.

How the leverage effect works

The leverage effect results from the lower capital investment compared to a direct investment in the underlying asset itself. Instead of investing the full price for the underlying asset, you only have to spend a portion of it. The issuer "lends" the investor an amount equal to the underlying price. For example, a leverage of 3 means that for the turbo you only have to invest one third of what the corresponding underlying asset costs. The leverage measures the intensity of this effect. It should be noted, however, that the leverage effect applies to both price increases and price losses. The lower the purchase price of a turbo long/short, the greater the leverage. The higher the leverage, the greater the profit or loss potential. The leverage effect is easily calculated: Leverage = price of the underlying x ratio / price of the turbo.

In addition to the strike price, which determines the level of leverage and the price of the turbo, the knock-out barrier of a turbo must also be considered. If the knock-out barrier of a turbo is touched or breached during the term, the product expires and is redeemed at the residual value. The residual value is often very low, which can lead to a total loss.

Turbos can be issued with a fixed term or an unlimited term ("open end"). In the case of turbos with a fixed term, the strike price, and the barrier (knock-out barrier) are fixed at the start of the term and remain the same for the duration of the product. In the case of turbos without a maturity ("open-end" turbos), the strike prices and knock-out barriers are adjusted at regular intervals. In accordance with the terms &conditions, this can even happen on a daily basis.