Limited Losses
Losses incurred on DLC positions are limited to the initial capital invested.
Compounded Returns
DLCs are structured based on the daily performance of their underlying index, and are as such intended to be traded intraday. The price performance of the underlying index and DLC are reset at the end of each trading day. This means that the performances each day are locked in and subsequent returns are based on what was achieved the day before. This process is referred to as compounding.
Airbag Mechanism
The airbag mechanism is designed to slow down the rate of loss in the value of the DLC during extreme market conditions. The airbag comes into effect at a predetermined percentage movement in the underlying asset. This level varies depending on the leverage ratio, as well as the nature of the underlying asset. If this occurs, the airbag triggers an intraday reset of the underlying asset. The reset takes place over a period of 30mins, during which trading is suspended. Following the reset, the performance of the underlying asset is based on the new observed level. This is designed to reduce the impact of any subsequent adverse price movement. The airbag mechanism will reduce the impact of any further adverse movement in the underlying asset, but will also maintain a reduced exposure to the asset in the event the price starts to move favourably after the airbag mechanism is triggered, thereby reducing its ability to recoup losses.
Click here for the list of Daily Leverage Certificates (DLCs) available.
