Turbo warrant on the DAX

Discussion in 'Options' started by Pekelo, Oct 22, 2008.

  1. Pekelo


    Anybody here trades them? If so, would you mind to write a short intro as where to do it and how?

    From Wiki:

    "In Germany buying and selling turbo warrants constitute 50% of all speculative derivatives trading. They are mainly sold to a retail clientele looking for high leverage."
  2. MTE


    The big problem with those is credit risk! Unlike exchange-traded options, you are exposed to the counter-party (i.e. issuer - banks) risk with them.
  3. ...first, you have to know that you can trade

    a) the Dax Index and
    b) the Dax Future.

    The Future is mainly traded via the EUREX and the "Xetra Dax Index" is traded via CFDs (contracts for difference - in Europe this is the most growing market for these instruments), via Warrants (including Turbos) and a special type of Index certificates.

    My own trading relies mainly on trading the Dax Index directly via CFDs:

    You have to pay attention, that there are differnet trading time ranges for the Dax Future (8-22 CET) and the Dax Index (9-17.35 CET) and so on...

  4. asap


    they are an exotic based on a barrier option that effectively knocks out the contract when price crosses it. big investment banks act as liquidity providers on these and the nyse/euronext is the venue where the trading takes place.

    the advantage of tw over plain vanilla option is that they carry almost 100 deltas with no vega risks and theta equivalent to cost of carry less dividends, as happens with the future contract.

    since they trade to close to parity at all times, a close to knock out tw could have a leverage of 100, 200 or even 1000 times. it is the supreme "bang for the buck" vehicle. to put in perspective, each and every day there is a couple of these tw's based on dax that go up 5 fold. you "just" have to be a good bottom/top picker to make a killing. :D

    very easy on hindsight :D
  5. DutchMan


    Turbo's (ABN Amro) and Speeders(Citibank) are very populair in Europe. Comp. with futures with a built-in stop loss (but there is a counterparty risk)