Up to what date before expiry can I sell my warrant/Classic Turbo certificate?
All products on equities and indices have their last stock exchange trading day three banking days before the valuation date. Commerzbank offers the opportunity in addition to continue trading the products OTC up to the valuation date. On the valuation date itself you can still sell the certificates/warrants back to us, over the counter, until 12 noon.
This rule applies to most products. Different rules apply for products on currencies, gold and silver. You can find a complete list of our trading times here.
What does the addition of “BEST” to the name of an Unlimited Turbo certificate mean?
With a BEST Unlimited Turbo certificate, strike price and stop barrier are the same. For investors this means speculating with even more aggressive products owing to higher leverage. Commerzbank offers BEST Unlimited Turbo certificates on stocks, indexes, currencies, precious metals and Bund futures. You can find the product brochure here.
How can I obtain a statement of sale for my stopped out Classic/BEST Unlimited Turbo certificate?
Unlimited and Classic Turbo certificates can be sold back to Commerzbank at EUR 0.001 on the date of the knock-out event.
Otherwise, the certificates will be automatically booked out at EUR 0.001 within five working days after the knock-out event.
Why does my call warrant fall in value when the underlying has risen or not changed today?
As well as the price of the respective underlying, the implicit volatility (i.e. the expected range of fluctuation in the underlying) is a substantial factor influencing the price of a warrant. Falling volatilities have a negative effect on the value of both call and put warrants, as with decreasing volatility the probability of a high intrinsic value on the expiry date decreases.
History shows that falling volatilities are often associated with phases when markets are rising. You then have two opposing effects on call warrants: the rise in the underlying has a positive effect (delta) while the fall in volatility has a negative influence on the price of the warrant (vega). As the influence of the rise in the underlying falls, the further the warrant will be out of the money. It is therefore quite often possible for call warrants to register a fall in value on days when the underlying has risen, as the effect of the fall in volatility has outweighed that of the rise in the underlying.
Why has the spread changed on my warrant/Turbo certificate?
As a leading issuer, Commerzbank always aims to give investors narrow, attractive spreads. But unfortunately the amount of the spread cannot be guaranteed and so may change. The amount of the spread depends mainly on the market situation and the liquidity of the related underlying. So you will generally observe, for instance, higher spreads outside stock exchange opening hours than when the exchange is trading.
What do I have to do when my warrant/Classic Turbo certificate falls due to get my money?
If a warrant or Turbo certificate falls due, its value will be determined on the valuation date at the closing price on the relevant exchange (for the DAX and German shares, this is Xetra). If the value is greater than zero, an automatic transfer via our clearing agent will then be carried out five banking days after the valuation date (on what is known as the maturity date).
Why is the redemption price of my Unlimited Turbo certificate not equal to the difference between the strike price and the knockout barrier?
With Unlimited Turbo certificates, once the knock-out barrier has been reached, the respective hedging transaction is closed out in trading. The result gives you the redemption amount, which does not necessarily equal the difference between the strike price and the KO barrier. With extreme jumps in prices, such as when trading opens, the redemption amount may therefore deviate significantly from the intrinsic value of the certificate, and the Unlimited Turbo certificate, in the worst case for investors, may expire with no value.
What happens to my warrant when an extraordinary dividend is distributed?
Under the warrant terms and conditions, a distribution of an extraordinary dividend counts as an adjustment event when strike prices and subscription ratios have to be adjusted. So the strike price will be adjusted downwards with a warrant, so that the effect of deducting the extraordinary dividend does not change its relative deviation from the price of the underlying. At the same time, the subscription ratio is adjusted so that the intrinsic value of the warrant remains unchanged – so the investor is not worse off than before the adjustment.
Commerzbank always bases adjustments on the adjustments to the related options on the main futures exchange (for German equities, the Eurex), which generally adjusts by the so-called R factor (price after the extraordinary dividend divided by the price before the extraordinary dividend).
What happens with my Unlimited Turbo certificate when a regular dividend is distributed?
Commerzbank generally passes on the full amount of the dividend payments received to the investors holding the Unlimited Turbo certificates.
This means that with Unlimited Turbo certificates on German and European equities, strike price and knock-out barrier are usually adjusted downward by the amount of the dividend distributed. With US equities and ADRs (foreign equities traded on a US stock exchange) on the other hand, KO barrier and strike price are adjusted by the amount of that portion of the dividend that Commerzbank effectively receives as issuer after deduction of withholding tax – that would currently be 85%.
What happens with my warrant when a regular dividend is distributed?
Generally the expected dividend has already been accounted for in the price of a warrant. This means that no change in the price of the warrant is to be expected on the day after an annual general meeting as a result of deducting the dividend (ignoring other factors influencing the price, such as volatility).
Calls that are deeply in the money and due to expire shortly are one exception to this. With these, the deduction of the dividend on the ex-dividend date can have a negative influence on the price of the warrant.
What does the addition of “Smart” to the name of an Unlimited Turbo certificate mean?
In contrast to “normal” Unlimited Turbo certificates, with a Smart Unlimited Turbo certificate the stop barrier only matters at the closing of the relevant stock exchange for the underlying. If with a Smart Turbo Bull certificate the underlying falls below the stop barrier during trading hours but is above it at closing, the product is not knocked out. But if the underlying touches/falls below the strike price during trading hours, then the Smart Unlimited Turbo certificate expires without any value (the same applies effectively to Smart Turbo Bear certificates). Commerzbank issues Smart Unlimited Turbo certificates on the DAX 30, the TecDAX and the Nasdaq 100. You can find the product brochure here.
Why has the strike price changed with my Unlimited Turbo certificate?
The strike price with an Unlimited Turbo certificate is equal to the financing level of the product. You therefore participate fully in the performance of the underlying without having paid a full capital amount. This is where the leverage effect of a Turbo certificate arises. The financing costs incurred by the issuer are reflected in an adjusting rate of interest which adjusts on a daily basis the strike prices of bull certificates upwards and bear certificates downwards. So that the strike price does not rise above/fall below the stop barrier over time and in order to maintain an appropriate difference between the two, the stop barrier will also be adjusted on the first trading day of each month. You can find the level of the current adjusting interest rate for an Unlimited Turbo certificate on our website upon entering the respective German securities identification number (WKN).
What are the times when my Turbo certificate can be knocked out?
A Turbo certificate can be knocked out whenever its underlying is being traded on the relevant stock exchange. For the DAX and all German equities, this means the Xetra trading hours from 9 a.m. to approx. 5.30 p.m. Under certain circumstances, Turbo certificates can be stopped out at times when the products themselves cannot be traded at all. This applies, for example, to products on EUR/USD, which is traded around the clock, or to products on Japanese securities.
When can I exercise my warrant?
Basically it makes little sense to exercise warrants as they can be traded throughout their term and the price you can obtain in selling one is higher than its intrinsic value. Calls that are in the money on equities that are just about to have a dividend distributed may be exceptions here. As Commerzbank’s warrants are American warrants, they can be exercised on a daily basis. To do this you need to send Commerzbank a written declaration, via the bank holding the certificates, that you wish to exercise the option. Declarations must reach us by 10 a.m. In practice, for the reason given above, it is rare for options to be exercised in this way.
How can I follow the latest price of my Unlimited Turbo certificate?
The “fair value” of an Unlimited Turbo is easy to work out. It is equal to the difference to the current market price of the underlying and the strike price of the certificate divided by the subscription ratio. With products on underlyings denominated in foreign currencies, you will also have to take the rate of exchange into account. That means dividing them by the rate of exchange, as Commerzbank products are always denominated in euro. Please note that Commerzbank’s pricing is always based on an indication of the respective underlying that also takes the depth of the market into account. This means that small deviations may arise between the fair value and price quoted by the issuer. But the fair value generally moves within the bid/offer spread quoted by Commerzbank.
The Financial Engineer 