Leverage products allow investors to participate to a disproportionately high degree in the performance
of the underlying security while themselves putting little money down. The leverage effect means that
the risk attached to these products is correspondingly higher than that of a direct investment.
Leverage products are thus suitable only for investors with a high risk profile.
Capital Protection Products
A capital protection product guarantees the investor a certain minimum repayment (usually 100%) of the
invested amount at the end of its term. It should be noted, however, that the price calculated during
the term of the derivative may be below the capital protection level. Depending on how they are
structured, the upside potential offered by capital protection products may be either capped or
Yield-enhancement products offer investors the chance of a higher yield than they would earn on a
direct investment in the underlying security when markets are moving slightly higher/lower or trending
sideways. Examples here include common instruments such as discount certificates, reverse convertibles
and barrier reverse convertibles.
Participation products generally combine a certain number of defined individual securities (a basket)
or an index into a single security. Participation products often fluctuate in a 1:1 relationship to
the underlying security (delta =1). At maturity, the closing index value or closing price of the
basket is paid out. As a rule, certificates offer an opportunity to achieve broad risk diversification
even with smaller investment amounts, while also keeping administrative costs low.
Further information on derivative products listed on the SIX Swiss Exchange can be found on the
Scoach Switzerland Ltd Website.