What is a turbo put and how to trade it?

Advantages and disadvantages of the turbo put

Negotiate the turbo put has a number of advantages and disadvantages.

The advantages of the turbo put

Among the advantages that the turbo put offers, there are:

  • The possibility of investing in many financial markets and in several underlying assets such as stocks, indices, commodities or currencies

  • Good liquidity and ease of access because put turbos are issued by banks, and are easily accessible for purchase and sale on the Paris Stock Exchange or with your broker

  • The use of a leverage effect which amplifies the variations of the underlying asset both upwards and downwards and which makes it possible to generate increased profits

  • The ease of following the calculation of the value of the derivative products because the put turbos are quoted continuously in real time, and the prices are available on Euronext Paris or on the site of your online broker

  • The absence of a fixed maturity allowing the investor to remain invested as long as his strategy requires

  • A maximum loss known in advance and limited to the amount invested.

The disadvantages of the turbo put

  • Among the investment risks linked to the turbo call, we find:

  • The risk of total loss of the capital invested in the event of deactivation of the turbo put when the deactivating barrier is crossed

  • The constraints linked to a short-term investment which require daily monitoring because of the exposure to daily upward and downward variations of the underlying

  • The high sensitivity to the exchange rate, in the case where the underlying is in foreign currency. Note, however, that the Turbo24 offered by IG does not present any exchange risk because it is denominated in euros.

  • The possibility of deactivation outside trading hours.

What is a turbo put and how to trade it in summary

the turbo put is a financial product that allows investors to take a downward position on certain underlying assets such as indices, commodities and currencies. Like all leveraged products, the turbo put can cause the loss of all the value of the investment, especially when the knock-out barrier is crossed.

Trade IG’s Turbo24s, the world’s only 24-hour tradable turbos[1]from Monday to Friday and without deadline.

[1] All Turbos can be traded 24/5, with the exception of Equity Turbos which are available from 3:30 p.m. to 10:00 p.m. for US stocks and 9:00 a.m. to 5:30 p.m. for UK and European stocks.

Leave a Comment