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1210 Discount Certificate with barriers

Product type number as specified by the Swiss Structured Products Association (SSPA): 1210

Please consult the termsheet and the accompanying issue prospectus for information on the exact product functionality, product details and risks.

Market expectations

  • Sideways moving or slightly rising underlying
  • Falling volatility
  • The underlying will not reach or go below a certain level (knock-in level/barrier) during the term

Characteristics

  • If the knock-in level is never touched, the repayment corresponds to the cap level.
  • If the underlying is lower than the cap level (strike price) on expiry, the underlying is delivered.
  • The product is issued at a discount to the underlying.
  • The product corresponds to a covered call strategy (option writing).
  • Several underlyings (worst of) make it possible to obtain higher discounts in exchange for greater risk.
  • The income accruing on the underlying is used for strategy purposes.
  • The profit potential is limited (cap level).

Advantages

  • The aim is to generate an excess return in sideways markets when compared to a direct investment in the underlying.
  • Lower purchase price than a direct investment in the underlying.
  • Due to the risk buffer, repayment of the cap level is also guaranteed if the performance of the underlying is slightly negative (provided the price of the underlying never touches or falls below the knock-in level).
  • Lower risk of loss than that of a direct investment in the underlying.

Disadvantages

  • If the underlying rises sharply, the return compared with a direct investment is limited.

Repayment terms

  • If the price of the underlying has neither touched nor fallen below the knock-in level during the term:
    • the nominal amount is paid out in cash.
  • If the price of the underlying has touched or fallen below the knock-in level during the term:
    • but is above the cap level on expiry, the nominal amount is paid out in cash.
    • and is lower than the cap level on expiry, the number of underlyings specified at the start is delivered for each nominal amount and/or a cash settlement is paid out.

Pay-off diagram upon expiry

1210 Pay-off

Examples upon expiry

Product & scenarios
  Scenario 1 Scenario 2 Scenario 3 Scenario 4
Description Rising underlying Slightly rising underlying Slightly falling underlying Falling underlying
Underlying value share X share X share X share X
Cap Level 110% 110% 110% 110%
Knock-in Level (Barrier) 80% 80% 80% 80%
Capital employed CHF 10'000 (100 certificates) CHF 10'000 (100 certificates) CHF 10'000 (100 certificates) CHF 10'000 (100 certificates)
Term 1 year 1 year 1 year 1 year
Issue price 100% 100% 100% 100%
Ratio 1 1 1 1
Share X at initial fixing CHF 110 CHF 110 CHF 110 CHF 110
Share X at maturity CHF 132 CHF 122.20 CHF 99 CHF 88
Barrier breached? No Yes No Yes
Performance share X 20% 2% -10% -20%
Payoff
  Scenario 1 Scenario 2 Scenario 3 Scenario 4 (physical delivery)
Calculation 100 certificates * 110 (Cap) 100 certificates * 110 (Cap) 100 certificates * 110 (Cap) 100 certificates * 90 (equivalent value)
Redemption CHF 11'000 CHF 11'000 CHF 11'000 CHF 9'000
Profit / Loss 10% 10% 10% -10%
Taxes
Swiss income tax
Term <1 year: free of tax
Term >1 year: Predominantly one-off interest payments (IUP)
Swiss withholding tax No
Swiss stamp tax Yes (if physical delivery / term > 1 year)
EU tax on interest No
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