Participation Products
One for one with the underlying, sometimes more.
Introduction
A participation product is the underlying wrapped as a security. The simplest, the tracker, is a zero-strike call: an option whose strike is zero is worth exactly the underlying, so the certificate moves one for one. It needs no bond, no sold option and no view on volatility.
The other members of the family add something to the tracker. Outperformance adds extra calls above the strike, paid for with forgone dividends, so the line gets steeper on the right. Bonus adds a down-and-out put, so the line gets a floor at the bonus level as long as the barrier holds. Twin-win adds two of those puts, so a moderate fall is turned into a gain.
None of this is capital protection. Once a barrier has been touched the put is gone and the product is a tracker again, ending wherever the underlying ends. The line is drawn for the scenario you choose; the barrier decides which line applies.
The products
In workbook order. Each page has an interactive payoff chart and a construction visualiser.
- 1300RisingTracker Certificate — Bull
One for one with the underlying, often an index or a basket that is hard to buy directly.No capital protection - 1300FallingTracker Certificate — Bear
Gains when the underlying falls, loses when it rises; worthless once the underlying reaches the reverse level.No capital protection - 1310RisingOutperformance Certificate
Moves one for one below the strike and faster than the underlying above it.No capital protection - 1320Sideways, RisingBonus Certificate
At least the bonus level at maturity if the barrier was never touched; a plain tracker if it was.Conditional protection Barrier - 1330RisingBonus Outperformance Certificate
A bonus certificate with extra participation above the strike.Conditional protection Barrier - 1340Rising, FallingTwin-Win Certificate
Gains from a rise and from a moderate fall; a plain tracker once the barrier is touched.No capital protection Barrier