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General
Exchange-traded products or ETPs are securities where the value and price is linked to the development of an underlying stock, index, commodity or exchange rate.
An exchange-traded product (ETP) is traded as easily as a stock. They provide an opportunity to profit from price increases or price decreases in a market. It gives you exposure with built-in leverage at a moderate borrowing cost. Unlike exchange-traded funds (ETFs) exchange-traded products are issued with security in the issuer's balance sheet. This means that in addition to market risk, the investor also bears an counterparty risk to the issuer.
The risk in an ETP is generally high. You should familiarize yourself well with what it is before you invest.
Leveraged ETPs means that the instruments are geared, meaning that they have a built-in loan part. This works similar to a mortgage - the leveraged allows you to take a position far greater than the amount you have available to invest yourself. You can use the Bull & Bear instruments to trade whether you believe in a rise (Bull) or a decline (Bear) in a the underlying market. At the same time, you must be aware that the risk is very high when investing with leverage.
Several of the ETPs will contain derivative elements and many have built-in leverage, both of which offer high market risk. For the investor, this means for example that the prices of Bull & Bear certificates will be able to fluctuate more than underlying assets, such as a stock. The instruments thus also have a greater risk of loss than an investment directly in the underlying reference. In addition, these leveraged products are rebalanced daily, which means that the return for long periods will deviate from market developments. The return can thus be negative even if the underlying has the same value at the time of purchase and sale. These properties make the Bull & Bear certificates unsuitable as a long-term investment alternatives.
Exchange Traded Products (ETP)
ETP is an abbreviation for Exchange Traded Products. An ETP is a so-called financial instrument, which is designed so that they give you a return related to the development in an underlying market such as the oil market. That way, you can invest in the value development of the price of oil without buying physical oil.
An ETP can be leveraged
An ETP can be set up so that it provides a leveraged exposure to the market. The leverage means borrowing. If you invest in a leveraged product, you borrow money at the same time, so you get a greater exposure than you have money for yourself here and now.
May be affected by exchange rates
Some ETPs also involve exposure to foreign currency as well as to the underlying market. An ETP does not pay a current coupon and is not capital protected.
NOTE! The risk is very high, you must not invest more than you can afford to lose.
NOTE! The return will deviate somewhat from the underlying market because it is deducted from an administration fee.
Leverage means borrowing. If you buy a product with a leverage x2, you can borrow the corresponding amount for which you invest. It doubles your chances of winning, and it doubles possible losses.
Example:
If, for example, you have a leverage factor of 2 (= 200%), you will be able to gain a profit for every hundred kroner invested as if you had invested two hundred kroner. But if the market falls, you also get double losses.
The leverage factor is usually set on a daily basis. It is important to be aware, because it means that the return over time can deviate significantly from the leverage factor multiplied by the underlying return.
Daily adjustment of the exposure is necessary to maintain a fixed daily leverage factor.
NOTE! The risk of leverage is very high. You need to be prepared to lose all your invested money.
We offer a number of ETPs that are listed on the Nordic MTF Finland Stock Exchange. These are bought and sold in the same way as a share in our stock trading. You can buy the products at the current market price during the exchange's opening hours 09:00-23:00 (EEST).
When buying or selling on the stock exchange, ordinary brokerage is charged to your broker.
An investment in an ETP requires that you have a VPS account. There will be a fee for the VPS account depending on the total holdings for one social security number or company number.
Yes, you must have a trading account (for money) and a VPS account (for securities) to trade on the stock exchange.
For ETPs where commodities are an underlying, these are qualities you as an investor must be aware of.
Unlike shares, which are "perpetual" physical ownership interests in a company, commodities are traded as time-limited contracts.
Forward and Futures
The contracts which are used to trade commodities are called forward or futures contracts. Commodities in the market are traded with an agreement on either physical delivery (forward) or a cash settlement (future) on a defined date in the future. This is by far the most common way in which most commodities are traded in the market.
Rolling
This means that an ETP that derives its exposure from commodities must periodically change the underlying commodity contract, as these will eventually expire. Such a change, where the old contract is sold and the new one is bought, is called a “roll”. A rolling of the future contract can mean that the new contract costs more per unit than the old one (contango in the forward curve). A roll can also mean that the new contract costs less per unit than the old one (backwardation in the forward curve).
Contracts are renewed
In the discussion of the «oil price», one is often based on the spot price or the raw material contract that at all times has the shortest time for delivery, and when it is further written that the «price» (over a longer period of time) has changed by x%, it will It is a question of a return that it is not possible to achieve as an investor, since the contracts will eventually expire and will have to be replaced with new ones with longer maturities, which do not necessarily cost the same per unit. However, this will not affect the value of the product per se.
Rebalanced every day to keep leverage
In the same way as ETPs based on stocks or stock indices, commodity-based products must also be rebalanced every day to maintain the leverage factor. In addition, ETPs with commodities as underlying often have currency risk, since underlying commodities contracts are often traded in currencies other than Euro.
In leveraged products, the number of shares to be shorted must be borrowed. A share loan will normally be subject to a borrowing cost measured in% p.a. of the value of the shares. This cost is therefore also reflected in products that provide a short exposure to equities or stock indices.
Note that the borrowing cost will depend on the number of times the shares in question have been shorted. For a x2 product, e.g. the borrowing costs are calculated twice (since shares are shorted for twice the amount of the product itself), for a x3 product the borrowing costs are calculated three times, etc.