Central government and central bank asset exposures as stipulated under Article 147 (2) (c) of the CRR, with their associated risk-weighted values.
Navigating Market Volatility: Your Guide to Investment Safety
In today's unpredictable market, it's crucial to safeguard your investments. Fortunately, leverage and investment products give you the power to build a protective layer for your portfolio. Here's how it works, along with some suitable underlying assets.
Lately, the DAX has taken a significant hit, losing around 4000 points from its all-time high. The MDAX, the index for medium-sized companies, has seen about a 20% drop from its latest peak. Geopolitical tensions, economic instability, and trade disputes are creating a highly volatile market, as evident in the DAX's VDAX volatility index, which is rapidly approaching 38 points. It seems like a nerve-wracking phase with no immediate end in sight.
Investment giants like Goldman Sachs have recently revised their earnings forecasts for European companies and reduced the target price for the broad-based Stoxx Europe 600 Index. Matthias Hüppe, an expert in investment and leverage products at HSBC, explains that institutional investors have been utilizing derivatives for some time to hedge parts of their portfolio or individual positions for a certain period. Structured securities such as certificates and leverage products provide private investors with numerous opportunities to at least partially hedge their portfolio and individual positions against price losses - and even benefit from market fluctuations during weak phases.
Strategies for falling markets "Leverage products like short knock-out options are suitable for both speculating on falling prices and for short-term hedging of positions," says Hüppe. These securities have a strike price and a knock-out barrier. For instance, in the case of selected short knock-out options on the DAX, both are set at 23,497.20 points. With the current DAX price at 19,738 points, the option costs 3.74 euros. If the DAX falls rapidly to 17,018 points, the value of the option could rise to around 6.50 euros. This is calculated as the difference between the strike price and the current DAX price, adjusted for the leverage ratio: (23,497 - 17,018) / 1,000 ≈ 6.48 euros. Such strategies can also be beneficial for individual stocks like Hensoldt. The stock of the defense company has doubled in the last six months, but with a P/E ratio of around 33, it is highly valued. At 45.00 euros, there is technical support. If the price falls below this, the stock could drop to the next support level at 35.00 euros, which also corresponds to the strike price of a selected put option.
Our editorial team at BÖRSE ONLINE has identified a total of six leverage and investment products that can protect your portfolio in times of crisis. To find out more about these products, as well as the short knock-out options on the DAX and the put options on Hensoldt, check out the current issue of BÖRSE ONLINE.
Take advantage of our special offer: secure three issues for only 9.90 euros instead of 20.40 euros, and enjoy exclusive stock tips and comprehensive industry analyses! Don't miss this opportunity to save over 50%.
Access the offer now
Sources: [1] The Balance; [2] Investopedia; [3] Futures.org; [4] Bloomberg; [5] Global Banking and Finance Review
Insights:- Short knock-out options (e.g., up-and-out calls) limit risk by automatically terminating the contract if the underlying asset breaches a predefined barrier, protecting the seller from unlimited downside.- Knock-In puts only become active if the asset falls below a barrier, making them cost-efficient compared to vanilla options.- Structured products with knock-out features, such as basket options, can limit downside while preserving capital unless the underlying collapses. These products often come with embedded financing charges that reduce the risk of overexposure.- Event-driven strategies, like knock-in straddles, activate only if volatility spikes post-event, providing cheap exposure to market moves without theta decay.- Defensive Knock-In Puts, Knock-Out Barrier Shorts, and Structured Notes with Buffers are cost-effective tools for crisis management. Defensive Knock-In Puts are ideal for commodities/FX hedgers anticipating specific downside thresholds, while Knock-Out Barrier Shorts limit losses on short positions during sell-offs, and Structured Notes with Buffers combine knock-out features with principal protection to cap downside while retaining upside participation.
- Due to the volatile market, the DAX has significantly dropped, causing concern for investors.
- Goldman Sachs has revised their earnings forecasts for European companies, and hedge funds like HSBC have been utilizing derivatives to protect their portfolios.
- Strategies such as short knock-out options can help investors hedge against price falls, as demonstrated in the case of Hensoldt.
- BÖRSE ONLINE has identified six leverage and investment products that can protect portfolios during a crisis.
- To stay informed about these products and exclusive stock tips, take advantage of the special offer from BÖRSE ONLINE and access the offer now. In addition to this, technology and sports sectors also provide investment opportunities, where careful analysis and strategic decision-making are essential in the evolving business landscape.
