A turbo is a structured product with the features and risks of a derivative. A turbo operates with a leverage. Turbos offer a chance of a high return, but you can also lose a lot of money in a short time. There are turbos on various underlying assets, such as a share, a basket of shares, an index, a currency or a commodity. Depending on your expectations, you can opt for a Long or Short variant.
The main features of a turbo are:
- Leverage: The leverage accelerates the price movement of the underlying asset. For example, with a leverage of five, the price of the turbo will move five times faster than the price of the underlying asset. This gives you a chance of a high return but also of a lot of loss. You can lose your entire investment.
- Financing level: With a turbo you only pay part of the value of the underlying asset. The rest will be funded by the issuer. We call this part the financing level and it provides the leverage effect.
- Stop-loss: A turbo has no maturity date, but a stop-loss. If you have not sold your turbo earlier, the turbo will run until the price of the underlying asset hits or breaks the level of the stop-loss. The turbo will then end automatically. You can then lose your entire investment. Sometimes you will still be paid a small residual value.
AFM product intervention on turbos
As of 1 October 2021, additional rules will apply to providers of turbos. These rules have been imposed by the AFM (Autoriteit Financiële Markten [Dutch Authority for the Financial Markets]). As a result of these rules, the maximum leverage of a turbo has been reduced. The maximum leverage now depends on the underlying value and will in many cases be limited to 5, 10 or 20. More information about the additional rules can be found on the AFM website.
For a complete overview of the available turbos, please refer to the BNP Paribas website.
Risk warning
Turbos are complex instruments and carry a high risk of rapidly accumulating losses due to the leverage effect. 62% of retail investors suffer losses when trading turbos from this supplier. It is important to understand how turbos work and whether you can afford the high risk of losses.