FAQ


TradeCenter

The TradeCenter is an Internet-based price information system. We publish our quotes via the TradeCenter and via Reuters or Bloomberg. Though the displayed quotes are normally up to date, only the price displayed by the partner bank in the trading system is applicable. This price can vary in some cases from the price displayed in the TradeCenter, because the information disseminated in the TradeCenter via the Internet is (as is the case with Reuters and Bloomberg) subject to a technically conditioned delay. Depending on the market movement, these prices can differ from the negotiable prices.
To the changes in the preliminary prices. The arrows display the trend in relation to the preliminary price, while the figures in EUR and the percentage represent the exact change with respect to the final price at 11:00 p.m. of the preceding day.
Open-ended turbo call on the DAX
Strike price: 4500
Knock Out: 4580
Interest: 2%
Current DAX: 4900
Turbo price: EUR 4.00

The turbo price results from the difference between the current DAX and the strike price, i.e. 400 points or EUR 4 at a ratio of 100 to 1.


The 4500 points in relation to the strike price are not "counted" by the buyer of the turbo call and thus financed by the issuer. In order to be able to take this interest into account daily, the strike price is adjusted daily during the call before the start of trading. The interest is calculated from the market interest (one-month EURIBOR) + an interest adjustment factor (interest adjustment factor 1.5% as of 11/2005).


At a market interest rate of 2%, the following results:

4500 * 3.5 % (2% + 1.5%) : 360 = 0.4375 4500 + 0.438 = 4500.438 new strike price: 4500.44


(rounded according to commercial practices)


With the DAX unchanged, the following turbo price results on the next day:


4900 – 4500.44 = 399.56 / 100 = EUR 3.99


Via this process, the investor thus "pays" the financing costs for the portion of the underlying asset financed by the issuer.


The above example describes a call. In the case of puts, in contrast, the investor is disadvantaged in relation to the interest because the investor is in principle providing the issuer money from the sale of the underlying asset. This interest effect is likewise compensated by an increase in the strike price, because the value of the put now rises. The calculation is made analogously to the above example. The interest is computed based on the market interest minus an adjustment factor.

Because over the period, the strike price approaches the knock-out barrier, it is necessary to adjust the barrier. Depending on the product, this occurs on the 1st or the 10th of the month, if such day is a trading day and otherwise on the first trading day after the 1st or the 10th calendar day. The knock-out barrier is approx. 1.75% above the strike price. When adjusted monthly, it is rounded up in the case of calls to the nearest whole tenth; in the case of puts, it is rounded down. This can mean that the gap will then be larger than 1.75%. During the month, the gap will then become less. The following example describes a call (long):

  Strike Knock-out Barrier
10 January 4500 4580
11 January 4500.44 4580
9 February 4513.14 4580
10 February 4513.58 +1.75% = 4592.57
(rounded in the case of calls to nearest whole tenth) i.e. 4600
 

The adjustment of the knock-out barrier has no impact on the financial value of the certificate.

When the knock-out barrier is reached, the position is liquidated. Lang & Schwarz will liquidate the counterposition (Hedge), in our example in the DAX Future, and thus compute the redemption price (the positive difference between the strike price and the liquidated hedge). This results in the residual value of the open-ended turbo, at which the certificates can be given back to the issuer.

After the liquidation of the hedge and the calculation of the residual value, the certificates can be returned over the counter to the issuer under normal market conditions at this value until 5 p.m. of the same day. If you do not sell your certificates to the issuer, they will automatically be cancelled at this value. However, the countervalue will be provided based on the more complex settlement five banking days after the knock-out barrier is reached. Should the knock-out barrier be reached after 5 p.m., no sale will be possible any more. The certificates will be booked out automatically at the corresponding residual value.

In this case, the turbo lapses without value. The risk of an opening below the strike price in the case of calls or above the strike price in the case of puts is borne solely by the issuer. One exception is products for which the strike price varies from the knock-out barrier. In this case, the residual value is paid out after the underlying hedge is liquidated. However, a total loss can come about in the event of unexpectedly sharp movements in the underlying asset.



Trading basics

The partner banks via which you can participate in real-time trading are listed here
Apart from the standard banking charges, no further costs are incurred, except when trading with funds, in which case costs of 0.08% are incurred. This is in keeping with the commission rate applicable on German stock exchanges.
We answer requests for quotes with high-quality quotes. We generally offer prices in German securities, for example, that are better than the current Xetra prices. We provide you this quote for around 20 seconds. We ask for your understanding that we reserve the right to reject transactions that can no longer be concluded at prices in line with the market as a result of the 20-second delay. In practice, however, this seldom occurs and generally does not affect private customers.


Special features of equities trading

During the opening of the stock exchange, we can offer a narrow spread, because we have the possibility to hedge against the risks of price changes through countertrades on the stock exchanges. Once the exchange has closed, this possibility no longer exists. Hence, the wider spread replaces the lack of any hedging opportunity.


Basics of warrants/certificates

You can request our warrants brochure here. Just how warrants and certificates function is described in detail in the brochure. You can likewise request information on our current warrants. Here you can obtain information by e-mail about current securities issues.
In real-time trading, we constantly provide buy and sell prices (quotes) for our products. It is thus possible to sell the products at any time. Our products are also listed on the EUWAX in Stuttgart. Here we provide our quotes for the brokerage firm responsible for pricing on the exchange. The brokerage firm then executes the order on this basis.

Nevertheless, restrictions can be imposed on the quotes in certain situations, such as if the underlying asset is suspended.
All our products are subject to so-called "automatic exercise". If the product has value at the end of the term, we instigate the transfer of the corresponding money amount (cash settlement) to your securities deposit account. This normally takes five trading days.
When a product is exercised, you receive the difference between the strike price and the current worth of the underlying asset (the so-called "intrinsic value"). When the product is sold at the currently quoted price, however, you normally receive a higher money amount (though the bank fees and charges must also be taken into account) because the quote considers the possibility that the underlying asset will move further in your favour during the residual term of the product (so-called "premium"). The premium is normally lower the more in the money the product is or the shorter the residual term.
The change in the underlying asset has a direct impact only on the "intrinsic value". The market value and premium are influenced by other parameters.

In addition to the interest and dividends, the implied volatility plays a big role here. For example, declining implied volatility can reduce the premium so sharply that the positive effect on the underlying asset might be reduced or even overcompensated. Likewise, investors can profit if higher volatility compensates the losses in the strike price.

By nature, these effects are the largest on warrants with no intrinsic value or with only a low intrinsic value. Products that are deep in the money are in contrast largely stable with respect to volatility changes.
The strike price and the subscription ratio are normally adjusted to the same degree as futures are on futures exchanges.

This assures that the customer will not be placed worse off than would be the case with a direct investment in the underlying asset. If possible, we adjust our products analogously to the Eurex. The greatest possible transparency is thus given.

Irrespective of these measures, capital changes can come about that are detrimental to warrant holders.
You can download an overview of trading times, due dates and KOs as a PDF file here


Special features of turbos

Open-ended turbos on the DAX are turbo warrants without any term limitation, but which have a stop-loss mechanism. As in the case of previous turbos without a stop-loss mechanism, these are products that take the performance of the DAX into account one-to-one, thus achieving great leverage in relation to the small amount of capital employed.

In contrast to the turbos with limited terms, the financing costs cannot be charged in the form of a premium that decreases each day. Instead, the strike price is adjusted daily by a corresponding amount, namely the financing costs. In addition to the daily strike price adjustment, the stop-loss barrier is adjusted monthly.

The following example explains the mechanism:

How does the strike price change?

Open-ended turbo call on the DAX Strike price: 4500 Knock-out: 4580 Interest: 2% Current DAX: 4900 Turbo price: EUR 4.00

The turbo price results from the difference between the current DAX and the strike price, i.e. 400 points or EUR 4 at a subscription ratio of 100 to 1.

The 4500 points in relation to the strike price are not "counted" by the buyer of the turbo call and thus financed by the issuer. In order to be able to take this interest into account daily, the strike price is adjusted daily during the call before the start of trading. The interest is calculated from the market interest (one-month EURIBOR) + an interest adjustment factor (interest adjustment factor 1.5% as of 11/2005).

At a market interest rate of 2%, the following results:

4500 * 3.5 % (2% + 1.5%) : 360 = 0.4375 4500 + 0.438 = 4500.438 new strike price: 4500.44

(rounded according to commercial practices)

With the DAX unchanged, the following turbo price results on the next day:

4900 – 4500.44 = 399.56 / 100 = EUR 3.99

Via this process, the investor thus "pays" the financing costs for the portion of the underlying asset financed by the issuer.

The above example describes a call. In the case of puts, in contrast, the investor is disadvantaged in relation to the interest because the investor is in principle providing the issuer money from the sale of the underlying asset. This interest effect is likewise compensated by an increase in the strike price, because the value of the put now rises. The calculation is made analogously to the above example. The interest is computed based on the market interest minus an adjustment factor.

How does the stop-loss mark change?

Because over the period, the strike price approaches the stop-loss mark, it is necessary to adjust the barrier. this occurs on the 1st (for some products, on the 10th) of the month, if such day is a trading day and otherwise on the first trading day after the 1st or the 10th calendar day. The knock-out barrier is approx. 1.75% above the strike price. When adjusted monthly, it is rounded up in the case of calls to the nearest whole tenth; in the case of puts, it is rounded down. This can mean that the gap will then be larger than 1.75%. During the month, the gap will then become less. The following example describes a call (long):

10 January
Strike Knock Out
4500 4580

11 January 4500.44 4580

9 February 4513.14 4580

10 February 4513.58 + 1.75% = 4592.57 (rounded in the case of calls to nearest whole tenth) i.e. 4600

The adjustment of the knock-out barrier has no impact on the financial value of the certificate.

What happens when the knock-out barrier is reached?

When the knock-out barrier is reached, the position is liquidated. Lang & Schwarz will liquidate the counterposition (Hedge), in our example in the DAX Future, and thus compute the redemption price (the positive difference between the strike price and the liquidated hedge). This results in the residual value of the open-ended turbo, at which the certificates can be given back to the issuer.

When and how do I receive my money when the knock-out barrier is reached?

After the liquidation of the hedge and the calculation of the residual value, the certificates can be returned over the counter to the issuer under normal market conditions at this value until 5 p.m. of the same day. If you do not sell your certificates to the issuer, they will automatically be cancelled at this value. However, the countervalue will be provided based on the more complex settlement five banking days after the knock-out barrier is reached. Should the knock-out barrier be reached after 5 p.m., no sale will be possible any more. The certificates will be booked out automatically at the corresponding residual value.

What happens when the index rises or falls over night above or below the strike price?

In this case, the turbo lapses without value. The risk of an opening below the strike price in the case of calls or above the strike price in the case of puts is borne solely by the issuer.

The name "DAX®" is a registered trademark of Deutsche Börse AG.
Knock-out and trading hours (on the expiry date) for turbos and warrants*
Underlying asset KO times** Trading hours on expiry date
DAX Index turbos Mon-Fri, 9:00 a.m. - 5:30 p.m.
+ Closing auction
on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.
DAX equities turbos Thornton on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.
MDAX equities turbos the Bird on the exchange: one day before expiry, 20:00
OTC: on the expiry date: 5:00 p.m.
European equities turbos Trading hours of the home exchanges
If relevant, including closing auction
on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.
USA equities turbos Mon-Fri, 15:30h - 22:00h
+ Closing auction
on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.
Other equities turbos Mon-Fri, 9:00 a.m. - 5:30 p.m.
+ Closing auction
on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.
Bund index turbos Mon-Fri, 8:00 a.m. - 10:00 p.m.
+ Closing auction
on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.
EUR/USD turbos Sun, from 9:00 p.m. - Fri, 11:00 p.m. on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 12:30 p.m.
ÖL turbos Sun, from 9:00 p.m. - Fri, 11:00 p.m. on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.
EUR/GBP turbos Sun, from 9:00 p.m. - Fri, 11:00 p.m. on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 12:30 p.m.
Gold turbos Sun, from 9:00 p.m. - Fri, 11:00 p.m. on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 14:00h
DAX warrant   on the exchange: one day before expiry, 5:30 p.m.
OTC: on the expiry date: 12:30 p.m.
German equities warrant   on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.
European equities warrant   on the exchange: one day before expiry, 8:00 p.m.
OTC: on the expiry date: 5:00 p.m.

As of 1 May 2015

* This workout is based on information we deem to be reliable. However, we cannot assume any warranty for the completeness or accuracy of the information. The complete and solely applicable product terms and conditions and further details of the issue may be found in the Base Prospectus and riders and the Final Terms and Conditions, which you can request from us by specifying the WKN.

** The times specified here are indicative, i.e. all prices published by the respective exchanges are relevant to the knock-out event, even if they are outside the time frame mentioned here.