DAX certificate with 5.3% chance and 16% discount

DAX certificate with 5.3% chance and 16% discount

Contrary to many expert opinions, who granted the DAX (ISIN: DE0008469008) only limited recovery potential after the crash in March 2020 to up to 8,255 points, the index was able to recover almost the entire price loss within just five months.

After even stubborn skeptics had to take note of the V-recovery of the stock exchanges, it now seems only a question of time for many market participants when the DAX will return to its old highs of February 2020.

The investment idea: Although the mood on the German stock market is currently good, there is also a likelihood of a decline in the DAX in the next few months. If you want to swap the risk and opportunity of a direct index investment for a predefined return, you could consider investing in discount certificates on the DAX.

With selected discount certificates on the DAX, investors can achieve high returns over the next few months even if the index is trading well below its current level in June 2021.

How it works: If the DAX is quoted at or above the cap on the certificate’s valuation day, which defines the certificate’s highest payout amount, the discount certificate will be repaid with its maximum amount of 120 euros.

The key data: The J.P. Morgan Discount Certificate (ISIN: DE000JM4NHQ0) on the DAX has a cap of 12,000 points and a subscription ratio of 0.01. The valuation date is June 18, 2021, and the certificate will be repaid on June 25, 2021. At the DAX level of 13,176 points, investors could buy the certificate for 113.95 euros. The certificate is thus 15.63 percent cheaper (hence the discount certificate) than the DAX index.

The opportunities: Since investors can currently purchase the certificate for 113.95 euros, it enables a gross return of 5.30 percent (= 6.60 percent per year) over the next ten months if the index is not at 8.92 on the valuation date Percent listed in the minus compared to its current value. In the case of Discount Certificates, in contrast to Bonus Certificates, only the closing price relevant on the valuation date is of importance for the investment result.

The risks: If the DAX is listed below the cap of 12,000 points on the valuation day, the certificate will be repaid in accordance with the subscription ratio of 0.01 at one hundredth of the closing price of the DAX determined on the valuation day. If the index then trades below the purchase price of the certificate, i.e. below 11,395 points, then the investment – before expenses – will yield a loss.

This article does not constitute a recommendation to buy or sell the DAX or investment products on the DAX. No liability is assumed for the correctness of the data.


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