Daily leverage certificates

[Audio] Welcome to our training video on Customer Training and Onboarding for CyberQuote Daily Leverage Certificates. This presentation will cover the vital information and steps for successfully onboarding and training our customers. In the next 25 slides, we will equip you with the essential knowledge and skills to effectively utilize our platform and maximize our services. Let's begin..

[Audio] This training video is about Customer Training and Onboarding for CyberQuote's Daily Leverage Certificates. We will be discussing the basics of DLCs and their features. Slide number two introduces the question, "What is a Daily Leverage Certificate?" DLCs are a structured financial instrument issued by banks and traded on the stock exchange. They do not have a physical certificate like traditional stocks. The main feature of DLCs is their fixed leverage, which ranges from 3 to 7 times of the daily performance of the underlying asset. This can be a market index or a stock. Single stock DLCs typically have a leverage of 5 times, while market index DLCs have options of 3, 5, or 7 times. DLCs come in two types: Long and Short. Long DLCs benefit from increases in the underlying asset's price, while Short DLCs benefit from decreases in the asset's price. In Europe, DLCs are also known as Constant Leverage Products or Factor Certificates. Before we continue, we would like an image of a DLC for this slide, perhaps using AI. This will help our customers better understand the concept. Let's move on to the next slide..

[Audio] This presentation will discuss the topic of fixed leverage in Daily Leverage Certificates, or DLCs. Fixed leverage, which ranges from 3x to 7x of the underlying asset performance, is a key aspect of DLCs and essential for successful trading. For example, a 3x Long DLC will increase by 3% if the underlying asset closes up 1%, and a 7x Long DLC will increase by 7%. The leverage in DLCs allows for potentially higher returns, but also increases the potential losses in case of a downward movement in the underlying asset. It is crucial to understand and carefully consider the leverage when trading DLCs. Stay tuned for the rest of our presentation on Daily Leverage Certificates..

[Audio] The topic of slide number 4 is the functionality of the Short DLC. This financial instrument allows investors to bet against the underlying asset, with a 3x Short DLC resulting in a 3% increase in value for a 1% decrease in the underlying asset and a 7x Short DLC resulting in a 7% increase in value for the same scenario. This can be beneficial for investors as it allows them to profit from the decline of the underlying asset through leveraging. However, it is important to note that leveraged products carry a higher level of risk, and investors should fully understand the workings of the Short DLC and carefully consider their investment strategies before making any decisions. This explanation should provide a better understanding of the Short DLC, and viewers should continue to watch for more information on our Daily Leverage Certificates..

[Audio] Slide number 5 of our Customer Training and Onboarding presentation focuses on Daily Leverage Certificates (DLCs), a type of financial instrument that allows for leveraged returns in different markets. Different colours are used to represent different DLCs and we recommend using consistent colours in your presentation to avoid confusion. It's important to note that DLCs may experience losses when the market moves in the opposite direction. For example, a 3x Long DLC will decrease by 3% if the underlying asset closes down 1%, while a 7x Short DLC will decrease by 7% if the underlying asset closes up 1%. DLCs will lose money when the underlying asset decreases in value due to market movements. We hope this information has helped you better understand DLCs. Remember to use consistent colours for different instruments in your presentation. The next slide will discuss another important topic.".

[Audio] We previously introduced the concept of Daily Leverage Certificates. Let's further explore what sets DLCs apart and why they may not be suitable for long-term investments. The term 'Daily' in DLC stands for short-term trading, usually within a day. This means any profits or losses are reset at the end of each trading day. Therefore, DLCs may not be the best choice for long-term investments due to the compounding effect of daily returns. One of the main benefits of DLCs is that the maximum loss is restricted to the initial invested amount, providing investors with a limit on potential losses. Furthermore, there is no requirement for investors to provide margins, making DLCs more accessible to a wider range of investors. DLCs are traded in board lot sizes of 100, meaning investors must purchase a minimum of 100 units at a time. This ensures a certain level of liquidity and facilitates efficient trading. Additionally, DLCs have a fixed expiry date with a maximum tenure of 3 years. At the end of this period, the final value of the DLC is calculated and paid to investors. In the event of a corporate action, such as dividends or a bonus issue, the issuer of the DLC will determine necessary adjustments to protect the interests of DLC investors. It is important to keep in mind the unique features and limitations of DLCs, which make them suitable for short-term trading but not the most suitable for long-term investments. This information will be helpful as you continue to learn about DLCs in our customer training and onboarding series..

[Audio] This section will explain the concept of DLC in numbers. DLC stands for Daily Leverage Certificates and is a popular investment product in the financial market. The data in the table shows the performance of the 3x Long DLC and the 7x Long DLC, both of which track an underlying asset. The following example will demonstrate how changes in the underlying asset's price can affect an investor's profit and loss. Assuming the underlying asset closed at $10, the investor bought 100 units of 3x Long DLC for $200 and 100 units of 7x Long DLC for an additional $200 at the start of trading. Looking at the left column of the table, the first row shows a 5% decrease in the underlying asset's price. This results in a $0.30 loss for one unit of 3x Long DLC and a 15% increase for one unit. The value of 7x Long DLC is even lower at $1.30, resulting in a $0.70 loss or a 35% decrease for one unit. Moving on to the second row, with a 3% decrease in the underlying asset's price, the 3x Long DLC's value is $1.82, with a $0.18 loss or a 9% decrease for one unit. The 7x Long DLC's value is slightly higher at $1.58, with a $0.42 loss or a 21% decrease for one unit. The third row shows a 1% decrease in the underlying asset's price, resulting in a $0.06 loss or a 3% decrease for one unit of 3x Long DLC and a $0.14 loss or a 7% decrease for one unit of 7x Long DLC. On the other hand, with an increase in the underlying asset's price, both 3x Long DLC and 7x Long DLC see gains in value, resulting in profits for the investor. The higher the increase in the underlying asset's price, the higher the profit for both DLCs. It's important to note that these numbers do not include costs and fees, which may affect the overall profit and loss for the investor. This example highlights how the performance of the underlying asset can impact the value and profit/loss of DLCs. In summary, DLCs are a good investment opportunity for those looking to leverage gains in the financial market. This table aims to provide a better understanding of how DLCs work and how numbers play a crucial role in an investor's decision-making. We will now move on to the next topic in the training..

[Audio] In this training, we will discuss Daily Leverage Certificates (DLCs), a popular investment product that provides leveraged exposure to underlying assets. One important aspect of DLCs is that they are reset at the end of each trading day, with the performance for each day being locked in and a new trading day beginning. This means that the performance of the underlying asset is measured from the previous trading day's closing level, and any gains or losses from the day before are compounded, affecting the DLC's performance. To better understand this, let's look at 3 different scenarios and how they would impact the DLC if held for more than one day. Another important factor to consider when trading DLCs is the costs and fees involved, including brokerage commission, SGX trading and clearing fees, and additional charges for overnight positions by the issuer, reflected in the DLC's price. It is crucial for our customers to understand the concept of compounding and its impact on DLC investments. This concludes our discussion on understanding DLC compounding..

[Audio] On this slide, we will be discussing the power of compounding in 5xLong DLCs. The graph shows the cumulative returns over five trading days for both the underlying asset and the 5xLong DLC. Assuming a 1% daily increase in the underlying asset, having a 5xLong DLC for all five days would result in a 5.1% increase in the underlying asset and a 27.63% increase in the 5xLong DLC's price. This is higher than the expected return of 25.5% (approximately five times the underlying asset's return) due to the compounding effect. A table is provided to further illustrate the consistent 5x return of the 5xLong DLC and a total return of 27.63%. This is just one example of how 5xLong DLCs can lead to higher returns through compounding. Stay tuned for more powerful tools to enhance your trading experience..

[Audio] On slide 10, it is suggested to plot a graph with 2 lines: line 1 representing the underlying asset and line 2 representing a 5xLong DLC. The x-axis would be Trading Day 1-5 and the y-axis would show the cumulative returns. After 5 days of the underlying asset decreasing by 2% each day, and owning a 5xLong DLC for all 5 days, the underlying asset fell by 9.61% and the 5xLong DLC decreased by 40.95% in price. This may seem like a significant loss, but in reality, it is less than the 48.05% expected (5 times the underlying asset's losses) due to compounding. The losses from the previous day lowered the starting price of the next day, resulting in lower overall loss in price terms. This shows that with DLC compounding, even if you are incorrect about the direction of the underlying asset, you can experience lower losses. To better understand this concept, a table is provided that compares the performance of the underlying asset and the 5xLong DLC on each trading day. In the table, it can be seen that the underlying asset experiences a total percent change of -9.61%, while the 5xLong DLC's total percent change is -40.95%. This significant difference is due to compounding, making the losses lower for the DLC. In summary, DLC compounding can be a useful strategy for managing risks and minimizing losses, even if initial predictions are incorrect. Thank you for listening and please stay tuned for the rest of our presentation..

[Audio] Slide number 11 of the Customer Training and Onboarding presentation for CyberQuote's Daily Leverage Certificates discusses the scenario of the underlying asset trading sideways and how it impacts the 5xLong DLC. When the underlying asset returns to its starting price after 5 trading days, the 5xLong DLC experiences a loss of 2.45% due to compounding. This loss serves as a reminder to carefully consider the risks of trading with leverage and use it appropriately. The accompanying table illustrates this scenario, showing a 0.00% change in the underlying asset's price and a -2.45% loss for the 5xLong DLC. It is important to understand the implications of compounding and the effects of a sideways market when trading with CyberQuote's Daily Leverage Certificates..

[Audio] Today, we will discuss the airbag mechanism for DLCs, or Daily Leverage Certificates. This feature is designed to provide added security for our customers in the volatile stock market. The airbag is triggered when the DLC is losing value due to the underlying asset moving in the opposite direction. As shown in the table, the airbag is only activated when the stock is experiencing a loss while the DLC is still gaining. This is a useful tool for customers during market fluctuations. Please continue to slide 13 for more DLC information..

[Audio] During trading hours, the airbag mechanism in Daily Leverage Certificates serves as a protective layer for investors. This feature can only be triggered when the market is open for the underlying asset, such as during US Exchange trading hours for a DLC on Nasdaq or Hong Kong Exchange trading hours for HSI DLC. When triggered, trading will be suspended for 30 minutes while a New Observed Level (NOL) is determined. The NOL, which is the lowest or highest value of the underlying asset, depending on the type of DLC, serves as a benchmark for calculating potential losses or gains. This provides a level of risk management and protection for investors. In conclusion, understanding the airbag mechanism is crucial for successful DLC trading..

[Audio] In this example, the airbag mechanism and its function during a market downturn will be examined. If the underlying index drops 10%, from 100 to 90, a 5x long DLC would drop 50%, from $2 to $1. The airbag would only be activated for the 5x long DLC, not the 5x short DLC. It would then be suspended for 30 minutes and a new observed level (NOL) would be determined at 90. Two potential outcomes during the 30-minute suspension period will be considered. The first, if the index falls an additional 8%, from 90 to 82.8 (based on NOL), the 5x long DLC would lose 40% of $1, bringing it to $0.60, different from the initial 40% loss which would have left it at $0.20. The second outcome, if the index rebounds 8%, from 90 to 97.2 (based on NOL), the 5x long DLC would gain 40% of $1, bringing it to $1.40, different from the initial 40% gain which would have left it at $1.80. In summary, the airbag mechanism acts as a safety net during a market downturn, adjusting potential gains or losses based on the new observed level. This concludes the discussion on the airbag mechanism. Stay tuned for the next segment on daily leverage certificates..

[Audio] We will be discussing the airbag mechanism in further detail on slide number 15. Airbags can only be triggered during trading hours of the underlying asset. This means that if the underlying asset experiences a large fall overnight, the Long DLC may be rendered worthless when it opens the next day. When the airbag is triggered, it will activate a NOL or non-operating loss, which will reduce the DLC's losses if the underlying asset continues to move in the same direction. However, it will also reduce the DLC's ability to recoup any losses. In some cases, an airbag may pause trading for 30 minutes. If the underlying asset continues to fall significantly, for example more than 20%, during the observation period, the DLC may also be rendered worthless. If a DLC becomes worthless, the issuer may request for it to be suspended and subsequently apply for it to be de-listed in order to prevent further losses for investors. It is important to understand the airbag mechanism and its potential impact on your DLCs. We highly recommend carefully monitoring your investments during trading hours to ensure you are aware of any potential airbag triggers. We will now move on to the next slide..

[Audio] In slide 16, we will discuss the use of Daily Leverage Certificates (DLCs) as a case study for CyberQuote. These DLCs are traded on the Singapore Exchange and have gained popularity among investors due to their ability to provide leverage and increase potential returns. The frequently traded DLCs on October 1, 2024 show a variety of options for investors, including long and short positions on popular stocks and indexes. Our case study will focus on the SATS DLC, which allows investors to take a leveraged position on SATS, a leading provider in the Singapore and regional market. Through this example, we will examine the potential risks and benefits of investing in DLCs. On the next slide, we will further explore the workings of DLCs and their impact on investment strategies..

[Audio] This slide discusses the naming convention for our daily leverage certificates, also known as DLCs. The information is important for both new and current customers to review. Our DLCs follow a specific format for naming. Let's take, for example, a DLC for Singapore Airlines with a leverage factor of 5, trading on the Singapore stock market and expiring on July 25th, 2025, denominated in US dollars. The naming convention for this DLC would be "SIA 5xShortSG250716US$A." Breaking down the naming convention, the first part "SIA" represents the code for the underlying asset, in this case, Singapore Airlines. The next part "5x" indicates the leverage factor for this DLC, meaning for every $1 movement in the underlying asset, the DLC will move $5. The third part "Short" indicates the direction of the DLC, in this case, it is a Short DLC, meaning it will move in the opposite direction of the underlying asset. This is important for customers to consider when making trading decisions. The fourth part "SG" represents the code for the stock market on which the DLC is trading, in this case, the Singapore stock market. The following part "250716" indicates the expiry date of the DLC in YYMMDD format, with this example being July 25th, 2025. For DLCs traded in currencies other than SGD, the currency code will also be included in the naming convention, as seen in the last part "US$A." Understanding the naming convention of our DLCs is crucial for making informed trading decisions. We hope this slide has clarified any confusion and we look forward to seeing our customers utilize this knowledge in their future trades..

[Audio] In this section, we will discuss several recent examples of DLCs from Edge Singapore on October 14, 2024. These examples will provide a better understanding of how DLCs operate and how they can benefit investors. The first example is Company A's DLC, created by Edge Singapore with a 5:1 leverage ratio. This means that for every $1 invested, the investor had exposure to $5 worth of Company A's stock. Although this type of leverage can lead to higher returns, it also carries a higher level of risk. The second example is Company B's DLC, also created by Edge Singapore, with a 3:1 leverage ratio. This means that for every $1 invested, the investor had exposure to $3 worth of Company B's stock. This type of leverage is less risky than the previous example, but still has potential for higher returns. The third and final example is Company C's DLC, also created by Edge Singapore, with a 2:1 leverage ratio. This means that for every $1 invested, investors had exposure to $2 worth of Company C's stock. This type of leverage is considered more conservative and less risky, with potential for higher returns compared to traditional stock investing. These are just a few recent examples of DLCs from Edge Singapore, showcasing a variety of leverage ratios to suit different investment goals and risk levels. It is important to thoroughly understand a DLC's risks before investing..

[Audio] This training video for CyberQuote's Daily Leverage Certificates will now discuss three different scenarios and use a color-coded system to make it more interactive. We will be focusing on the price movements of SATS 5xLongSG260716 and SATS from January to October 2024. This information is essential for understanding the potential outcomes and risks associated with these certificates. Please pay close attention and take notes as we work towards equipping you with the necessary knowledge and skills to effectively use Daily Leverage Certificates in your trading strategies. Let's dive into the next three slides together. Thank you for your participation and best of luck in your trading journey. Let's continue to the next slide..

[Audio] Slide 20 of our presentation presents a case study on SATS stock from 15Jan24 to 19Apr24. During this time, the stock showed a downward trend, falling from $2.95 to $2.40. Our SATS 5xLong DLC also experienced a decrease, from $0.48 to $0.146. This serves as a clear example of how being long on the 5xLong DLC was not a profitable decision while SATS stock was on a decline. We do not recommend holding onto DLCs for long-term investments. However, let's consider what would have happened if the investor had kept the 5xLong DLC for the entire three months. In this scenario, the investor would have suffered a loss of $0.334, equivalent to approximately 70% of their capital. This is a significantly greater loss compared to the $0.55 decrease in SATS stock, which is only around 18.6%. Although the investor still faced a substantial loss, it is lower than the potential 93% loss that would have occurred if they had invested in the 5xSHORT DLC due to the daily re-fix mechanism. This case study highlights the critical importance of understanding the risks and potential losses associated with DLC investments. As shown, choosing the right DLC can have a significant impact on the outcome. We urge all our investors to conduct thorough research and carefully consider their investment choices to maximize their profits..

[Audio] We will now examine a case study for CyberQuote's Daily Leverage Certificates, focusing on SATS stock from 22Apr24 to 6Oct24. During this period, SATS stock showed a positive trend, starting at $2.41 and reaching $3.84. However, the results were even more impressive for those who invested in SATS 5xLong DLC, which began at $0.155 and traded up to $0.925. Investors who held the 5xLong DLC for the entire period (not recommended as DLCs are not meant for long-term holds) saw a return of $0.77, equivalent to approximately 497% of their capital. In comparison, SATS stock saw a gain of approximately $1.43, or about 59.3% during the same period. This indicates that the DLC investor saw a significant increase of 497%, almost 5 times their capital, compared to the 59.3% increase for SATS stock. This significant difference is a result of the leverage and daily re-fixing of the DLC. This case study serves as a clear demonstration of the potential benefits of investing in Daily Leverage Certificates. Let's now closely examine SATS stock from 22Apr2024 to 6Oct2024..

[Audio] Slide number 22 of our training video focuses on the case study of SATS and its quarterly profit report on 20Aug24. SATS reported a profit of S$65 million, a significant improvement from the previous quarter's loss of S$29.9 million. This led to a significant increase in SATS stock price the following day, from $3.22 to $3.59, a jump of 11.5%. The SATS 5xLong DLC also saw a significant increase, trading from $0.455 to $0.72, a rise of about 58%. This one day move clearly illustrates the power of leverage in DLCs. The DLC increased by 5 times the underlying stock's move, resulting in a ~58% increase by the end of 21Aug. This showcases how leverage, when used correctly, can greatly benefit investors. However, it is important to note that the risk is also magnified by the same magnitude if the investor's prediction is wrong. This case study highlights the potential gains and risks associated with DLCs. As we have reached the end of slide number 22, with only 3 more slides left in our presentation, let's continue to learn about the world of CyberQuote Daily Leverage Certificates..

[Audio] Today's training video will focus on Customer Training and Onboarding, specifically the risks and benefits of daily leverage certificates or DLCs. One risk to consider is the potential for magnified losses due to the leverage factor. The airbag mechanism in DLCs can also result in a slower recovery of the price. Market risks are also a concern, with a potential for a DLC to become worthless if the underlying asset falls a certain percentage. Time zone risks should also be taken into account, as investors may not be able to cut their losses until the market opens. Additionally, there is the possibility of counterparty risks if the issuer or guarantor fails to fulfill their obligations. On the positive side, DLC investments can potentially result in gains being magnified by the leverage factor and the airbag mechanism can slow the decline of the price. Another benefit is that no margin is required, ensuring that investors cannot lose more than their initial investment. Thank you for watching our discussion on the risks and benefits of investing in DLCs. We hope this has provided you with a better understanding of daily leverage certificates..

[Audio] Investor suitability is crucial for considering Daily Leverage Certificates (DLCs), as these financial instruments are designed for investors who are willing to take on the risk of potential substantial losses. These losses can occur within a short timeframe, and it is important for investors to have a strong understanding of the product and possess a high level of knowledge or sufficient trading experience. This is necessary in order to properly evaluate and assess the product structure, associated risks, valuation, costs, and expected returns. DLCs are designed for achieving short-term investment results that correspond to the daily magnified performance of the underlying asset. Due to their complex nature, DLCs are only suitable for investors with a deep understanding of more complex products and a high risk tolerance. Therefore, it is crucial for all investors to be qualified to trade in Specified Investment Products (SIP) in order to engage in DLC trading. For more information on SIP, please visit sgx.com/sip. We strongly advise investors to thoroughly read the listing documents for the relevant DLC before making any investment decisions. This will provide important information on the product's features, risks, and potential returns..

[Audio] We appreciate you watching our training video on Customer Training and Onboarding for CyberQuote Daily Leverage Certificates. As we wrap up, we would like to remind you of the copyright and disclaimer information for this presentation. It is important to note that no part of this presentation or slides may be reproduced, stored in a retrieval system, or transmitted without the prior permission of the copyright owner. If you would like to use any of the content from this presentation, please reach out to Sam for permission. Furthermore, we would like to emphasize that the author of this presentation makes no warranties on any claims. This presentation is not intended to be a recommendation, offer, or solicitation to buy or sell any investment product. It is crucial to understand that investments are subject to risks and the risk of loss in futures, options, or any leveraged trading can be substantial. We advise you to seek advice from a financial advisor and carefully read the governing terms and conditions and risk disclosure statement before making any investment decisions. Please note that this presentation does not take into account your specific investment objectives, financial situation, or particular needs. Lastly, we would like to remind you that the copyright for this presentation belongs to Sam Phoen and all rights are reserved. Once again, thank you for joining us for this training video. We hope you have found it informative and helpful for your customer training and onboarding. We wish you all the best in your future endeavors. Thank you for listening..