Academy #2Basic Turbos

2

3

Turbo’s Why important?

Possibility to enhance your return relative to a direct investment

Potentially more advantageous in short-term investing◦ B&R Competition

4

Stop-loss level No expiration date

Value turbo never negative

So, existence of stop-loss level◦ Losses at max total investment◦ Removed from exchange◦ Residual value

5

Tradability Euronext Amsterdam

9:05 till 17:30

Normal bid (bied) – ask (laat)

6

What can you trade? What products can be traded with turbos?

◦ Regular stocks◦ Bonds◦ Indices◦ Currencies◦ Commodities◦ ...

◦ Turbos short vs. longwww.abnamromarkets.nl/turbo

7

Value Value equal to the difference between price

of underlying value and financing level turbo

Value turbo long = Price underlying value – financing levelValue turbo short = Financing level – Price underlying value

Note: Currency exchange rate

8

Value of a Turbo long “Borrow money to invest”

9

“Lend money”

Short in the underlying

Value of a Turbo short

Finan

cing

Leve

lSh

ort S

tock

Turb

o va

lue

Finan

cing

Leve

l Shor

t St

ock

Turb

o va

lue

Shor

t Sto

ck

10

Leverage

𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒𝑡𝑢𝑟𝑏𝑜 h𝑠 𝑜𝑟𝑡=𝑃𝑢𝑣

𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑛𝑔 𝑙𝑒𝑣𝑒𝑙− 𝑃𝑢𝑣

11

Leverage

12

Leverage

1 2 3 4 5 6 7 8 9 100

2

4

6

8

10

12"Leverage with financing level of 10"

Price of the Turbo

Leve

rage

13

Leverage

5 6 7 8 9 10 11 1200.5

11.5

22.5

33.5

44.5 "Short Leverage with financing level of ...

Price of the Turbo

Leve

rage

0.50.666666666666667

0.8751.14285714285714

1.52

2.754

0 2 4 6 8 10 12 14 16

Short StockTurbo value

Financinglevel

Leve

rage

14

Financing level Influences:

◦ Value turbo◦ Leverage factor◦ Dividend◦ Interest

15

16

Important features Financing costs/benefits

◦ Libor rate (Londen Interbank offered rate)◦ Turbo short(costs) vs. Turbo long(benefits)

Transaction costs◦ Bid/Ask-spread◦ Brokerage fee

Taxes◦ No paid out dividends -> no tax on dividends

17

Risks Price

Leverage

Stop-Loss

18

Risks Exchange rate risks

◦ Quanto for currency hedged!

Interest rate risk (changing)

Credit/Counterparty risk◦ Bankruptcy ABN Amro

19

Example Dow JonesValue turbo long = price underlying value – financing level

(ratio x exchange rate)

Price underlying value 11.000 pointsFinancing level 10.000 pointsStop-loss level 10.200 pointsEuro/dollar exchange rate 1,25 Ratio 100Value turbo long 8Leverage 11

20

Scenario’s(1) Scenario 1:

◦ Dow Jones increases with 400 points◦ Return from 11.000 till 11.400 is 3,64%◦ Value turbo?◦ Return?

Scenario 2:◦ Equal price. Anything happens?

21

Scenario’s(2) Scenario 3:

◦ Dow Jones decreases with 300 points◦ Return from 11.000 till 10.700 is -2,73%◦ Value turbo?◦ Return

22

Scenario(3) Scenario 4:

◦ Dow Jones decreases with 800 points◦ Stop-loss is 10.200 and bank sells product for

10.150 (-7,73%)◦ Value turbo?◦ Return?

Scenario 5:◦ Scenario 4, but bank sells at 9.995?

23

Conclusion Turbo’s Opportunity to leverage Huge profit- and loss potential Don’t lose more then investment

◦stop-loss Easily tradable Broad asortiment Euronext Amsterdam

But.. Risk and costs involved!

24

Leverage turns good deals into great deals!- Herman “Hefboom” van Heden

25

B&R Committees Activities & Lustrum Almanac Alumni B&R Academy Commercial Team Investment Week & Symposium Marketing

◦ http://www.bnrbeurs.nl/vereniging/commissies/

26

Activities & Lustrum Organize internal events:

◦Wine tasting◦Poker tournament◦In-house events

Lustrum

Part time (6hr/week)

27

Almanac Recap the highlights of this year

Get to know the society from the inside

Part-time (5 hrs/week)

28

Alumni Connect old and new members

You can prove yourself!

No specific experience required

Part-time (5hrs/week)

29

B&R Academy Help organizing the B&R Academy

Develop your knowledge and skill-set

Part-time (<5hrs/week)

30

Commercial Team Get in touch with companies

Improve social & sales skill

Part-time (5-10hrs/week)

31

Investment Week & Symposium Organize the biggest event of the year

Big responsibility

Part-time (10hrs/week from Oct-May)

32

Marketing Responsible for external & internal marketing of events

Develop our strategy further

Part-time(5hrs/week)