Knockout Certificates

Knockout Certificates are derivative financial instruments that offer investors the opportunity to participate disproportionately in the price movements of an underlying asset. These certificates are characterized by a knockout threshold, at which point the certificate immediately expires and becomes worthless. In this article, we will examine the Open-End Turbo-Optionsschein auf BASF issued on 11/27/2017 with a term of days. We will also look at the underlying asset, BASF SE (DE000BASF111).

What are Knockout Certificates?

Knockout Certificates are structured investment products that enable investors to disproportionately benefit from the price movements of an underlying asset. These certificates contain a knockout threshold, at which point the certificate expires immediately, and the investor loses their entire investment. However, they also offer the potential to make substantial gains if the underlying asset moves in the desired direction.

Functionality of the Open-End Turbo-Optionsschein auf BASF

The Open-End Turbo-Optionsschein auf BASF was issued on 11/27/2017 and has a term of days. During this period, investors disproportionately participate in the price movements of the underlying asset, BASF SE (DE000BASF111). If the price of the underlying asset reaches or exceeds the knockout threshold, the certificate expires immediately, and the investor loses their entire investment. However, if the knockout threshold is not reached, the investor can realize high gains.

Advantages of Knockout Certificates

High Potential for Gains: Due to the leverage effect, Knockout Certificates offer the chance to make substantial gains with a low capital investment.

Transparency: The leverage effect and the knockout threshold are clearly defined and easily understandable for investors.

Flexibility: Knockout Certificates offer a flexible investment option for different market conditions.

Risks and Considerations

Despite the attractive features of Knockout Certificates, investors should also consider the associated risks:

Knockout Risk: If the price of the underlying asset reaches the knockout threshold, the certificate expires immediately, and the investor loses their entire investment.

Market Risk: The certificate's performance strongly depends on the price development of the underlying asset, which can lead to unpredictable fluctuations.

Issuer Risk: The risk that the certificate's issuer becomes insolvent cannot be ruled out. Investors should therefore carefully assess the issuer's creditworthiness.