Academy #2 Basic Turbos

1. Academy #2 Basic Turbos

3. Turbo’s • Why important? • Possibility to enhance your return relative to a direct investment • Potentially more advantageous in short-term investing • B&R Competition

4. 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

5. Tradability • Euronext Amsterdam • 9:05 till 17:30 • Normal bid (bied) – ask (laat)

6. What can you trade? • What products can be traded with turbos? • Regular stocks • Bonds • Indices • Currencies • Commodities • ... • Turbos short vs. long www.abnamromarkets.nl/turbo

7. Value • Value equal to the difference between price of underlying value and financing level turbo Value turbo long = Price underlying value – financing level Value turbo short = Financing level – Price underlying value Note: Currency exchange rate

8. Value of a Turbo long • “Borrow money to invest”

9. Value of a Turbo short • “Lend money” • Short in the underlying Financing Level Short Stock Financing Level Short Stock Short Stock Turbo value Turbo value

10. Leverage

11. Leverage

12. Leverage

13. Leverage

14. Financing level • Influences: • Value turbo • Leverage factor • Dividend • Interest

16. 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

17. Risks • Price • Leverage • Stop-Loss

18. Risks • Exchange rate risks • Quanto for currency hedged! • Interest rate risk (changing) • Credit/Counterparty risk • Bankruptcy ABN Amro

19. Example Dow Jones Value turbo long = price underlying value – financing level (ratio x exchange rate) Price underlying value 11.000 points Financing level 10.000 points Stop-loss level 10.200 points Euro/dollar exchange rate 1,25 Ratio 100 Value turbo long 8 Leverage 11

20. 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?

21. Scenario’s(2) • Scenario 3: • Dow Jones decreases with 300 points • Return from 11.000 till 10.700 is -2,73% • Value turbo? • Return

22. 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?

23. 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!

24. Leverage turns good deals into great deals!- Herman “Hefboom” van Heden

25. B&R Committees • Activities & Lustrum • Almanac • Alumni • B&R Academy • Commercial Team • Investment Week & Symposium • Marketing • http://www.bnrbeurs.nl/vereniging/commissies/

26. Activities & Lustrum • Organize internal events: • Wine tasting • Poker tournament • In-house events • Lustrum • Part time (6hr/week)

27. Almanac • Recap the highlights of this year • Get to know the society from the inside • Part-time (5 hrs/week)

28. Alumni • Connect old and new members • You can prove yourself! • No specific experience required • Part-time (5hrs/week)

29. B&R Academy • Help organizing the B&R Academy • Develop your knowledge and skill-set • Part-time (<5hrs/week)

30. Commercial Team • Get in touch with companies • Improve social & sales skill • Part-time (5-10hrs/week)

31. Investment Week & Symposium • Organize the biggest event of the year • Big responsibility • Part-time (10hrs/week from Oct-May)

32. Marketing • Responsible for external & internal marketing of events • Develop our strategy further • Part-time(5hrs/week)