Participation certificates
The performance of the participation certificate depends
on the performance of the futures contract
Participation Certificates
WTI/BRENT CRUDE/NATURAL GAS/e-mini S&P500/e-mini DJI participation certificates/ e-mini NASDAQ100/ GOLD Future / SILVER Future
Participation certificate price = nearest futures contract price x RATIO x USDCZK.
DAX participation certificate
DAX participation certificate price = nearest futures contract price x RATIO x EURCZK.
Thus, the performance of the participation certificate depends on the performance of the futures contract, RATIO and USDCZK/EURCZK FX rate. The certificate always tracks the nearest futures contract on the relevant stock exchange NYMEX/ICE/CME/CBT/EUREX/COMEX. Of course, the certificate has an unlimited maturity date. Therefore, the so-called roll-over or rolling contract must take place regularly shortly before the expiry of the nearest futures contract.
Rolling means that the expiring futures contract is sold and the nearest futures contract is purchased. During rolling a change to the RATIO may arise and usually arises. On the one hand, rolling is burdened by selling and buying costs of futures contracts and on the other hand, losses or gains may be implemented.
Gains arise during rolling when the price of the expiring futures contract is higher than the price of the new futures contract (so-called backwardation). More may be invested in the new futures and the RATIO rises.
Losses during rolling will arise when the price of the expiring futures contract is lower than the price of the new futures contract (so-called contango). And therefore less may be invested in the new futures and the RATIO falls.
The higher the RATIO, the more the client participates in the rise of the futures contract.
The rise of the USDCZK/EURCZK exchange rate (so-called weakening of the crown against USD/against EUR) supports the rise of the certificate price. And on the contrary, the fall in the USDCZK/EURCZK exchange rate (so-called strengthening of the crown against USD/EUR) supports the fall in the certificate price.
Your advantages
- In case of rising prices of underlying assets (WTI Crude, BRENT CRUDE, gold, silver, NATURAL GAS/e-mini S&P500/e-mini DJI/DAX), you participate in this rise.
You should know
Falling markets cause losses in participation certificates.
The price of a WTI/BRENT CRUDE/NATURAL GAS participation certificate may fall during its life to 0 CZK and subsequently may result in the delisting of the certificate and therefore the loss of the entire investment. This occurs in a situation when the price of the tracked WTI/BRENT CRUDE/NATURAL GAS futures contract falls to 0 USD or below 0 USD or in case that during the rolling contract the price of the old or new futures contract will be equal to 0 USD or below 0 USD.
The performance of the certificate positively or negatively affects the development of the exchange rate between the certificate currency (CZK) and the currency in which the underlying asset is traded. If CZK strengthens, the certificate price falls, if CZK weakens the certificate price rises.
Investors bear the risk of the issuer (Erste Group Bank AG).
What else you should know about investments in the certificates
Participation gold certificate price = gold spot price x RATIO x USDCZK.
Participation silver certificate price = silver spot price x RATIO x USDCZK.
The RATIO is constant throughout the life of the certificate. The certificate has an unlimited maturity date.
The performance of this participation gold/silver certificate depends on the performance of the gold/silver price and USDCZK exchange rate.
If the USDCZK exchange rate were fixed, the certificate would reflect the price fluctuations of the underlying asset (gold/silver) at a 1:1 ratio.
The rise of the USDCZK exchange rate (so-called weakening of the crown against USD) supports the rise of the certificate price. And, on the contrary, the fall in the USD exchange rate (so-called strengthening of the crown against USD) supports the fall in the certificate price.
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