Certificates and leveraged products
Structured products that track, cushion or amplify a market move.
Certificates and leveraged products are issued by banks and follow an underlying — an index, a share, a commodity. Some soften small losses in exchange for a capped gain; others multiply the move in both directions. They are tools for a specific view, not a buy-and-forget holding.
Defined payoff
Each product states in advance how it behaves when the underlying moves.
Short time frames
Leveraged products are mostly held for days or weeks, not years.
Terms first
The key information document lists the payoff, the costs and the risks. Read it before you trade.
Common types
- Index and tracker certificates: follow an underlying one to one.
- Discount and bonus certificates: give up part of the upside for a buffer against losses.
- Knock-out products and warrants: use leverage and can expire worthless.
Leveraged products can lose their entire value very quickly, and a knock-out product ends the moment its barrier is touched. You also carry the issuer’s credit risk: if the issuer fails, the product can become worthless whatever the underlying does.