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Exchange-traded products, or ETPs, are securities where the value and price of the product is linked to the performance of an underlying stock, index, commodity or currency.

An ETP provides the opportunity to benefit from both price increases or price decreases in different markets. It gives you exposure with built-in leverage at a moderate cost of borrowing. Unlike exchange-traded funds (ETFs), exchange-traded products are issued with the security of the issuer's balance sheet. This means that in addition to the market risk, the investor also bears a counterparty risk towards the issuer.

The risk in an ETP is generally high. You should familiarize yourself with these products before investing.

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 Mini Futures, Knock-out Warrants and Bull & Bear certificates to trade whether you believe in a rise (Bull/Long) or a decline (Bear/Short) 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 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.

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 that you borrow from the issuer. If you buy a product with a leverage X2, you borrow the same amount as you invest. This doubles the potential return on investment, but also doubles any potential losses.

For example, if you trade a Bull & Bear certificate with a leverage factor of 2 (= 200%), you invest 100 SEK and get a daily return as if you had invested 200 SEK. However, if the market goes in the opposite direction, you will also suffer double losses.

It is important to be aware of the daily rebalancing with Bull & Bear certificates, as it means that the return over time can deviate significantly from the leverage factor multiplied by the return of the underlying reference. The daily leverage adjustment is necessary to maintain a fixed daily leverage factor.

Feel free to read our educational articles and watch our videos which you can find under the EDUCATION tab. There you can learn more about all our products and how they differ.

PLEASE NOTE! The risk of leverage is very high. You must be prepared to lose all your invested money.

We offer several ETPs listed on the Nordic Growth Market (NGM). They are bought and sold in the same way as shares via Avanza and Nordnet. You can buy products at the current market price during stock exchange opening hours from 08:00 to 22:00 CET. Different opening hours may occur, e.g. on public holidays, and may also vary depending on the underlying and the market.

When buying or selling on the stock exchange, ordinary brokerage is charged to your broker.

An investment in an ETP requires that you have anaccount for example, Investment savings account (ISK) or kapitalförsäkrings. There will be a fee for the account depending on the total holdings.

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 SEK.

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.