FAQ

TradeCenter

Can I trade at the prices displayed in the TradeCenter/Internet?

The TradeCenter is a price information system that uses the Internet. We publish our quotes via the TradeCenter. Although the quotes displayed are usually up to date, only the price displayed by the partner bank in the trading system is binding for the customer. In individual cases, this may differ from the price displayed in the TradeCenter because the dissemination of information via the TradeCenter over the Internet is subject to technical delays. Depending on market movements, these prices may therefore differ from the tradable prices.

To what do the arrows and changes in the real-time prices in the TradeCenter refer?

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.

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 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 knock-out barrier change?

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.

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. 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

What are the trading times?

Our trading times are Mo-Fr 7:30am-11:00pm, Sa from 10am-1pm, and Su 5pm-7pm.

How can I participate in real-time trading?

The partner banks via which you can participate in real-time trading are listed here

What does real-time trading cost?

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.


Basics of warrants/certificates

How do I receive information on warrants/certificates?

You will find the relevant information, such as product specifications or the basic information sheet, on the respective detail pages for our warrants and certificates.

Can I resell my warrants/certificates at any time?

In real-time trading, we generally provide continuous purchase and sale prices (quotes) for our products. This means that our products can generally be sold at any time. Our products are also listed on the EUWAX in Stuttgart. Here, we provide our quotes to the brokerage firm responsible for determining the stock market price. The brokerage firm then executes your order on this basis.

Nevertheless, in special situations, such as suspensions of the underlying asset, there may be restrictions on quoting.

What happens with my warrant at the end of the term?

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.

Does it make more sense to sell or exercise a warrant?

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.

Why does the price of the warrant always move parallel to the price of the underlying asset?

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.

What happens with warrants/certificates if the underlying asset changes, e.g. through a share split, capital increase, spin-off or merger?

The strike price and subscription ratio are adjusted to the same extent as the futures contracts on the futures exchanges. If there's no equivalent futures contract, the issuer uses adjustment factors to make sure that the buyer of the derivative isn't worse off than the buyer of the underlying asset.

This ensures that the customer is not essentially worse off than if they had invested directly in the underlying asset. As far as possible, we adjust our products in line with Eurex. This ensures the greatest possible transparency.

Regardless of these measures, there may be a change in capital that is disadvantageous to a warrant or certificate holder.

Overview of trading hours, maturities and KOs

You can find an overview of trading hours, maturities, and knock-outs in the respective final terms and conditions on the details pages for your derivative.






Lang & Schwarz TradeCenter AG & Co. KG
Breite Straße 34
40213 Düsseldorf
Phone: +49211 - 13840 – 404
Fax: +49211 - 13840 - 90
Mail: public-relations(at)ls-d.de