Bonus certificate
If the price of the underlying asset over the duration of the bonus certificate does not decline below a specific level and does not exceed a specific margin on its maturity date, the certificate holder is paid a bonus on the maturity date. The bonus is not paid if the certificate holder sells the certificate in advance of maturity.
The investor purchases a certificate at the currently offered price and can sell it at any date before maturity for the current bid price while giving up the right to any interest.
The margin in which the underlying asset can fluctuate in order to achieve the bonus is defined as a positive percentage of the bonus (e.g. for CECEBON3 it is 45% growth) and a lower safety barrier (e.g. for CECEBON3 this is limited to a maximum decline of 40%). Therefore the margin is from -40% to +45%. The percentage in the growth or decline of the underlying asset is determined using a fixed value (for CECEBON3 the value was fixed at 2,430.11 points).
Three situations may occur:
1) The value of the underlying asset does not decline over their lifespan by more than the limit (40%) from the fix rate and will not appreciate above the bonus (45%) from the fix by the maturity date, after which the owners will be paid the bonus on the maturity date as defined above (for CECEBON3, 45% profit is shown). The bonus is expressed as a percentage of the nominal value.
Example:
An investor purchases a CECEBON3 certificate for CZK 2,900. The zone is from -40% to +45% with regards to the fix of 2,430.11 points. The CECE index during its lifespan drops by a maximum of 35% with respect to the fix. At the maturity date the CECE index has a value of 2,500 points. (growth of 2.8% compared to the fix). The nominal value of the certificate is €100.
During its lifespan, the certificate has not dropped by more than 40% of the fix meaning that the client has the right to a bonus totaling 45% as the yield on the maturity date is only 2.8%. The owner on the maturity date will have a profit of 45% of the nominal value and will be paid €145. The yield on the maturity date has no impact on the bonus as long as it does not drop below the barrier.
2) The underlying asset does not fall below the lower barrier during the lifespan of the certificate (40%) but has appreciated against the fix when compared to the bonus (more than 45%). The owner in this case is paid the actual appreciation and the value does not change.
Example:
An investor purchases a CECEBON3 certificate for CZK 2,900. The zone is from -40% to +45% with regards to the fix of 2,430.11 points. The CECE index during its lifespan drops by a maximum of 35% with respect to the fix. At the maturity date the CECE index has a value of 3,655 points. (growth of 50% compared to the fix). The nominal value of the certificate is €100.
During its lifespan, the certificate has not dropped by more than 40% of the fix but has exceeded 45% growth at the maturity date. The owner then receives a return of 50% on the nominal value and will be paid €150. As long as the certificate does not drop below the barrier during its lifespan and has a higher yield on the maturity date than the bonus, the owner is paid this higher yield.
3) If the underlying asset breaks the lower barrier (40%) during its lifespan. From the moment this occurs, the certificate is transformed into 1:1 direct investment into the underlying asset. On the maturity date the owner receives the profit or loss matching that of the underlying asset.
Example:
An investor purchases a CECEBON3 certificate for CZK 2,900. The zone is from -40% to +45% with regards to the fix of 2,430.11 points. The CECE index during its lifespan drops by a maximum of 55% with respect to the fix. At the maturity date the CECE index has a value of a) 2,500 points. (growth of 2.8% compared to the fix), b) 2,200b. (growth of 10.5% compared to the fix). The nominal value of the certificate is €100.
- The certificate dropped by more than 40% compared to the fix during its lifespan meaning the owner has no right to the bonus of more than 45% and the certificate becomes a direct investment. The owner on the maturity date will have a profit of 2.8% of the nominal value and will be paid €102.8.
- The certificate dropped by more than 40% compared to the fix during its lifespan meaning the owner has no right to the bonus of more than 45% and the certificate becomes a direct investment. The owner on the maturity date will have a profit of 10.5% of the nominal value and and will be paid €89.5.
A bonus certificate is best for long-term investors who speculate on a high increase in the underlying asset and who do not need to worry about a slight decline or only slight growth as the bonus is used in this case.
List of certificates offered by Fio
- PX Bonus 114 + certificate
- CECE Bonus III certificate
- China Bonus III certificate
- TOP Czech Bonus CZK certificate
- TOP Czech Bonus CZK II certificate
