Academy #2 Basic Turbos
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Transcript of Academy #2 Basic Turbos
Academy #2Basic Turbos
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Turbo’s Why important?
Possibility to enhance your return relative to a direct investment
Potentially more advantageous in short-term investing◦ B&R Competition
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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
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Tradability Euronext Amsterdam
9:05 till 17:30
Normal bid (bied) – ask (laat)
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What can you trade? What products can be traded with turbos?
◦ Regular stocks◦ Bonds◦ Indices◦ Currencies◦ Commodities◦ ...
◦ Turbos short vs. longwww.abnamromarkets.nl/turbo
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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
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Value of a Turbo long “Borrow money to invest”
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“Lend money”
Short in the underlying
Value of a Turbo short
Finan
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Leve
lSh
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Turb
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Finan
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Leve
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Turb
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Shor
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Leverage
𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒𝑡𝑢𝑟𝑏𝑜 h𝑠 𝑜𝑟𝑡=𝑃𝑢𝑣
𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑛𝑔 𝑙𝑒𝑣𝑒𝑙− 𝑃𝑢𝑣
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Leverage
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Leverage
1 2 3 4 5 6 7 8 9 100
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12"Leverage with financing level of 10"
Price of the Turbo
Leve
rage
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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
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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
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Financing level Influences:
◦ Value turbo◦ Leverage factor◦ Dividend◦ Interest
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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
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Risks Price
Leverage
Stop-Loss
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Risks Exchange rate risks
◦ Quanto for currency hedged!
Interest rate risk (changing)
Credit/Counterparty risk◦ Bankruptcy ABN Amro
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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
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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?
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Scenario’s(2) Scenario 3:
◦ Dow Jones decreases with 300 points◦ Return from 11.000 till 10.700 is -2,73%◦ Value turbo?◦ Return
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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?
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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!
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Leverage turns good deals into great deals!- Herman “Hefboom” van Heden
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B&R Committees Activities & Lustrum Almanac Alumni B&R Academy Commercial Team Investment Week & Symposium Marketing
◦ http://www.bnrbeurs.nl/vereniging/commissies/
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Activities & Lustrum Organize internal events:
◦Wine tasting◦Poker tournament◦In-house events
Lustrum
Part time (6hr/week)
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Almanac Recap the highlights of this year
Get to know the society from the inside
Part-time (5 hrs/week)
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Alumni Connect old and new members
You can prove yourself!
No specific experience required
Part-time (5hrs/week)
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B&R Academy Help organizing the B&R Academy
Develop your knowledge and skill-set
Part-time (<5hrs/week)
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Commercial Team Get in touch with companies
Improve social & sales skill
Part-time (5-10hrs/week)
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Investment Week & Symposium Organize the biggest event of the year
Big responsibility
Part-time (10hrs/week from Oct-May)
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Marketing Responsible for external & internal marketing of events
Develop our strategy further
Part-time(5hrs/week)