Safety buffer |
Many structured products provide attractive returns even when the price of the underlying instrument declines modestly, provided that a predetermined safety threshold is not touched or undercut. The underlying instrument's current price difference from this threshold is referred to as the "safety buffer".
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Sensitivity |
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Short / going short |
Many market participants sell financial instruments without actually owning them (i.e. a "short sale"). The goal in doing so is to profit from falling prices and to ultimately buy back the instrument at a lower price at some point in the future. In such a case, the total decline in price corresponds to the profit a short-seller realises on the trade. Establishing such a position is referred to as "going short". In daily practice, investors also use this term to describe the purchase of put options or put warrants, even though such transactions don't involve an actual short sale.
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Spread |
As a general rule, issuers continuously post bid and ask prices for the products they issue, thereby ensuring the tradability of those securities even if there is little or no turnover taking place otherwise in the marketplace. The difference between the two prices is referred to as the "spread".
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Sprint certificate |
Sprint certificates benefit disproportionately from moderate price increases in the underlying instrument (in most cases, double the amount). However, the maximum possible profit they afford is limited by a predetermined amount.
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Stop-loss threshold |
Many knock-out warrants also feature a stop-loss threshold. If the price of the underlying instrument breaches that level, the product becomes prematurely due and payable, but in most instances the investor receives payment of a residual value.
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Subscription period |
The subscription period is the length of time during which investors can subscribe to a new offering of certificates.
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