How to find the right Sprint certificate
Before buying a sprint certificate, investors should develop a differentiated market assessment, as this product is particularly suitable for moderately rising markets. The position of the price of the underlying in relation to the strike price and cap is the control instrument for individual risk tolerance or expected returns. In principle, two strategies can be distinguished.
Investors who assume that the price of the underlying will remain constant could choose a sprint certificate with a cap at the level of the current price of the underlying. In this constellation, the Sprint Certificate may trade at a discount to the price of the underlying. In order to achieve the maximum return, the underlying only needs to trend sideways. However, since the certificate price already contains the doubled price component, falling underlying prices are leveraged, so that disproportionate losses can occur compared to direct investments.
On the other hand, if investors expect the price of the underlying to rise, you could choose a Sprint Certificate whose strike price is the same as the current price of the underlying. In order to make a profit, it is necessary for the price of the underlying asset to rise – the more, the better. When prices rise, investors only risk losing part of the price gains if prices are above the cap due to the fixed maximum amount. If the hoped-for price increase in the underlying fails to materialize and the underlying is quoted below the strike price on the valuation date, investors suffer a loss. In this case, the redemption amount corresponds to the closing price of the underlying.
Important: When choosing the Sprint Certificate, investors should ensure that the product has a sufficiently long term so that the expectation of rising prices can be reflected in the price of the certificate.
Due to the option components it contains, the certificate does not initially react fully to price increases in the amount of the corresponding participation factor, especially in the case of a long remaining term above the strike price. Until the end of the term, the increasing approximation of the price of the Sprint Certificate to its calculated value can be observed.