5GXS eee hakae uC Ma et Me Rca Mane ee Different investment products have different features and risk characteristics. In making your investment decisions, you need to understand the product features and assess whether you can afford the possible loss. However, you should remember that higher risk does not necessarily lead to higher returns. Understanding the features of the product you invest in is the way to go to have better control over your investments and increasing your chances of making money out of them! ‘lick on each tb to lear more about dervatives. einen set Devas Fess of xhnge Tat Oeil Dera) Detniton “hi wri covers SGXAited derivative products or products with derivatives améedéedin hem. But what are dervatves? ‘A ceivaiveis pe ef fnancalcenivact whose values dependant upon or derived fom other underying assets. The Underiingasete Os deratve contac an be anhing, ud 1. Flnareiis— Both physi! (ea eurency, eat) 258 Intangible fg inoras ats. equty des) 2, Melae 9. cooper, tom, zn) 13. Agroutural and fam cutout (69. rubter, catfoe) 4. Energy (29. fue) Wen you buy a servatve contac. + You donot own the undeying assets because yout Investment tus to buy he underying aes. ro ' You are taking vow on how much the valu of he Underiing aati up or down.‘lick on each ab to learn more about drivatives. J Fane of chong Tada Dates ste Des ees of Derivatives ‘he deratve Uses of Derivatives Daften | Uses ofDeivaties | fetus of xunge Tad Deas se Dah (sted Derivatives){lick on each tab to loam the key features of Warrants and Options. “The righ to buy or sal the underying stock a a specif price the exercise price or strike price}: and on or by 3 specified date (the expiry dat). © Call warrant option ~ the right to buy the underlying 2 Put warranvoption ~ he right ta sl the underiying © European style: The warrantopton isa corract that may ony be exercised on expiration © Amorican styl: The waranifoption isa contact thal may be exercised on any racing day on or bore expiry dale © Ihe worth noting that mest ofthe structured warrants curently lsed en the Exchange are European si. 19 Have specifies expiry cates. | No value ater the expiry date, because the right to buyisell no longer exists. ‘The number of warrants needed to exercise nto 1 unt ofthe underlying asset (8.9. share). ‘A warrant with @ conversion ratio of § means that §warranis are needed to convert into 1 unit ofthe underiying asset.tse Teng Wechinion | Pedr ents Steet Maxum Uitly | MaginRagemens a Financial stun, tke an investment bank, related to Developed by an exchange ‘he ssuer ofthe underiing seo. ster |_asngcann | Peas Sesenrt | Mantsity | Magn Repent Bulla viee Invenio con by call aan Bush vie ness can by a al oten esa oton evs vw: vets can buy put warant Bens vow: mets can buy apt onton er selacalepton tat Thing Mecham |__madutemees | Seinen | Main ity | Magn Regione de range ot exerte pices and ei dates wich re | Contacts ae standard th med ey prods and dsteminod bye eects wots pce sue Tring hicanin | PdurFntes —|___Setment | inn tity | Mag eaten Primary ash etl Ccarenty here oly optone on ars cn SOXDT are ‘hey are cash seties Trading Mecanim | Peder enue Serdement ona Lay | Marin Reemeas Lite ora investment Potentially united for shor sales sur ‘ang Mechanism |_ Prost Fares Seteent Mosimun bit |_ Margi epee ne None ‘Applicable to an cpio selior but not option buyersoe! noney ‘A structured warrant ean options sai tobe in-the-meney, tshe-money, af cut-tthe-money depending onthe spt price af the underying secutiy relative othe stko pric. ‘Acall warantiinthe-merey, when the eke price below the spo! price ofthe undoing, That, tho call warrant sill has postive intrinsic valus (Right to Buy) (ight to Sol) Value neeneme =a cme rostve ve ‘Atthemoney. > ‘Strike price = spot price of ee ed Nove [casters pSigptersetotn Se gereniners Le oust " undertying undertying Newt eu la. ey “The valu of warant canbe broken ito 2 components: Value of Warrant = Intrinske Value + Tie Vsiue “The intrinsic valve fluctuates withthe urderjing asset price and is he ference between the spot pce ofthe underng assel and ‘he ce pice athe warrant. Time values the amount of premium above the nti vale, It decreases ovr the We of the warrant or open, ands 2er0 on expiry date Factors that influence the Warrant Price “The valve of a warrant aran opon is determined by mathematical pring modes, baeedon many factors clung 2 underyng asset price the toexplry of warrant 2 exercise ie of warrant © dhidend yield of Me underying aset © implied volatility of the undying asset © prevaing mtrest rate “The key factors alecting the vale ofthe warant ter tis isle ae played Click on each factor to learn more. ‘An upside movorantin the undaryngassot makes a cal waranption ‘more valuable and 2 put waranpton loss valuable. ‘The higher the pce fluctuation of he undervng ase, te rear the ‘aderving Asset Price Ineroaene > imped Voiaiiy of Unceriing Asset Increases potent fr the wararepion io Wade nshe-money. ‘The shorter the time fo expiry. the lesser the possbily thatthe undering Tine fo Exory of Warrant Decreaoes asso" rice moves in favout ofthe warrant holder Al eleo being equal, Ps Fesuls na lower ine vale othe warrant KEE eekthe warrant. A warrant with higher implied volatility has a higher warrant price because it has a gteater possibility of reaching or exceeding its exercise price. Sn Trading of Warrants and Options ee { Rotryante apie ne anes sew me he dn el te ‘warrantopion haie’'s view. © Losses can aso be high ithe underlying moves against the warantopton holier’ view [ierrix pp 2 WavanOpton oer re unsecured creas issuers ' No preferential claim to any asset that an etuer may hols inthe event he esuars are unable {oil tor ebigaton, Monet Risk © Valua ofthe wararis or optons fs susceptble to prevaling markt forces, indudng demand frst i arc Supa ofthe warrants oF options, Lugudty Rive 2 For warrant, the market-naker may be the only partcipant buying and eeling th contracts ity i Sand there may be oroumetances where investors may nt be ate buy or 20 wares the pres dies 12 ithe underjing asset ie denominated a curency citferant rom the cuenc othe Foreign Exchange Risk b _warranopton pie, foreign exchange rate Nctuatone wil also afect he pice of the ‘warranioptin Click on the ico to view the pay profile ofthe respective warrantloption. oO {Long Call WarrantOption Long Put WarrantiOption SUE Click on each tab to learn the Key features of Exchange Traded Funds (ETFs). © An Investment fund Iste and rade ona stock exchange. «2 Gives investors exposure to diferent asset classes Ike stocks, bonds and comedies etc ‘© Apassive instrument aimed at replesing te performance of an underyng index. They are rot expected to ‘utpertxm or underperiorm tha index and would provide etus very similar to Fe perermance ofthe index over theong run © Investors can buy sel unis ofthe ETF though @ broker at marke price toushout te rang day.En ieee ai ee dae Click on each tab to learn the key features of Exchange Traded Funds (ETFs). What itis — @ The NAV of an ETF reflects the fair value of an ETF unit. @ Net Asset Value (NAV) is calculated as follows: Total fund assets - Total fund liebilities NAV per unit= “Number of outstanding ETF units, NAV is calculated once at the end of the each trading day and published dzily. @ However, since ETFs are listed securities, they are traded at the market price rather than the net asset value. © The traded price of an ETF may deviate from its NAV due to the demand and supply situation in the marketplace. © Apart from the end of day NAV, most ETFs provide an indicative NAV calculated periodically throughout the trading day. This indicative NAV is sometimes known, as |OPV (Indicative Optimised Portfolio Value). 9 To give investors the closest estimate of the fair value of the ETF, the ETFs listed on SGX-ST have the NAVs or IOPVs published on: 2 SGX Website; or @ SGXNET announcements; or ETF website Pa ‘The ETFs listed on SGX-ST can be generally divided into 2 kinds: 1. Cash-Based ETFs 2. Synthetic ETES ‘The diference in hese 2 types of ETFs is the replication method used to track the performance of the underlying asset Cash-Biased ETFs > Direct Replication + Statistical or Representative Sampling Synthetic ETFs: + Synthetic ReplicationETF direc inosts in the game constituents and inthe same proportion 2s the underlying Index to sel rack he performance ofthe unserying index. “Comgonants of underyng index: ‘Componenes of ET:Exchange Traded Funds (ETFs) © ETF ivosts ina selected numberof constituent othe uncerbing index o ac he erteranee of euch index ‘Component of undering index ‘Components of ETF © This metnod is common} used when the issuer wishes to erloy physical repicaon but the index has foo many constants, making it etiulttg acqute and manage the proportion fal he Inde consitunis “Counierparty eke may xi in cath cased ETF ifthe cath based ETF wera o ener ino secunia landing ansecton a he ‘und if exposed toe ere ak ofthe courterparty who bonew the secures. Secures lending Vancactons are erated no ‘te generate lending revenues which canbe use i ofst the mpact of fund expensas onthe perfomance of te ETF. Sree) SGX © Typical do nt nves inthe constuens of he benchmark rex * © Ives the use of devave o relate he perormance ote index 1 ANETE tht adeps the syne replication method may: ( Hold cash andra basket ef cocuntis that are not he constituents of th sec of th undoringindox ans use ‘ervalves such ae owaps Wo exchange tne perfomance othe basket of secures with fn performance of he index Forexampe: etormance of ‘Swap Counterparty ‘Assets eid by ETF issuer ‘whose perlomance wl be ™ theo siap forte performance of Index XYZ. K ‘SWAP , 2 Syme raplicaton methods loth asuerto minimise tacking ero, but ths is done wth cost. 12 The ETF wil be exposed to the cre sk he counterparty when swaps are used by he ssuerto exchange he performance of the azels hel’ by the ETF forthe perfomance othe undering index .Sere ae ciao) Efectos SGXS ‘Select one af the options below. ETFs use snap or devalives io replicate the index O Fulrepeated © Representative semping, © Synthetic epliated. None ofthe above. ° Feedback CComect. Wal dene! Fly replicated ETF sirectinvess inthe same constivents and inthe same proporton '3s tho underlying index to rack he performance ofthe underlying index: Represeniaive Samgling ETF Invests ma selacted number af conetitents ofthe underying inex t rack the performance of such index. Synthetic replication ETF uses some form of swap or derivatives io repicae he index. Depending on the strategy which investors inten to adop, investors may choose between long and shor ETFS Clik on ch of he flowing ypes of ETF te ean more Long only oneto-one | 9 Tracks he movernet ofthe unceying index inthe same dreetion. Index tacking ETFS © Value of tie ETFe il ee when the undying index fall © Use shor seling,detvatives, and other leveraged investment echriqus o achieve the Shart ETF: also wm” ver (oppaste] performance ofthe underyng index. ‘ss verse ETFs or Bear er) | @ Most of uch ETF are only intended o track the undervng index ona daly bass of tne undayng index crops in value by 39% ma day, the short ET is expect to erease in value by 3% fr tat doy. (esSS Depensing onthe satogy whic vast intend to atop, investors may choose between long and short ETFs, Clik on ach of te folowing ives of ETFs to lean more. ‘This example explains the fect of sccumuaing gains and losses onthe value ofa shox ETF. Day 1 2 3 4] Cumulative Change ‘aly Change =| |e Underiying index | 7,000 | 950 | 9025 | ea7ez | 823% ‘Shor ETF 00 | 4.050 | 4025 | osrse | 4.730% ‘Since the index fallen by bout 6.29% since the rs day, the shor ETF shoul hve nested by bout 5.29% above he valve ofthe inde. However, from his exami, we soe that he valve ofthe shor ETF has also gan 736% since he fist cay. Sach is the curative effect on shor ETFs, Gre = Competed o unlisted unt trusts, ETFs are appealing to investors in two aspects: © Low distribution expenses: ETFs aro adel Ike stocks, sted on the SGX Investors pay brokerage comission inthe range of 0.25% to 0.50% for each trade. Unt trusts, on the athe hand, typically charge the buyer of the uni trust 3910 5% ‘of sales charges. © Price transparency: ETFs are traded a! known prices throughout a trading day. Unt rusts ar priced les frequent, most daly, Some uni rusts are priced even less frequent, at most rrontly“The ey ck factors for ETFs are display Click each factor to learn more. ‘The 6ay-o-day potatal for an investor o experience losses rom fluctuation i rces of he Mat isk dering sacurtes! assets “racking enor perry ttc me apt ea ‘Some ETFs may use tnancial derivatives (2g. swap arangement with a third party) to achieve ts ‘Counterparty rik Investment objective. Wony counterparty Isto perform ls abgatons under the dervatve tension, he ETF may suf ox ‘The marketenaker may be the ony partipant buying and eelng the units an there Lui Fisk ‘may be crcumstances where ewestors may na beable to buy or se Uns athe rces desired Invesor maybe exposed to fucations In foreign exchange rates whic Ineease or erode Foreign Exchange Rsk > investment returns on the ETF. For example, the ETF is denominated in USD and be asses in which the ETF holds re denominated ina curency other than USD, the ivesto’is exposed to fucation in oregn ‘exchange ale betwoen USD and tis curoncy ‘Select True or False for each of these sentences about ETFs that use synthetic replication. True False ov They invest in a basket of securities that may not be the © constituent stock of the underlying asset. "8 Debt security issued by a third-party financial institution (usualy an investment bank). 2 Designed to track the performance of underlying assets such as an equity index, commodity price, and eurency rate@ Returns of ETNs are based on the performance of the underlying assets. ‘@ ETNs do not provide periodic coupon payments like bonds. 2 ETNs do not pay interest. 2 ETNs do not guarantee returns or return of principal. 2 Investors are exposed tothe credit risks of ETN issuers, who usually are unrelated to the Issuers ofthe underiying ‘assets. This is also known as issuer risk {2 Other general risks such as market risk and liquidity risk are also applicable to ETNs. ‘Secutty ype > Investment Funds Debt security| Diverieation > ‘Varies, depencing on underying index Varies, depending on underyng index Dividend istibuion > ‘Yes, depending on indvdual ETF No Princizal quaranteed > No No Exo No “racking ror > Yes No ‘resis ofissver No. Fund asses are segregsted rom Yes. ETNs are debt obligation owed ty the reel b issuer's asset issuer to investors.‘Select one of the options below. {Which of the following is nota feature of an Exchange Traded Note (ETN)? SS | Feedback Correct. Wel done! [ANETN is 0 deb seu designed to tack the perfrmance of underyng asets such as an equity index. commodity proe and exchange rae. issued by ald party franca ston. As such, Invector are expouod tote cred rek of te isuer Lke ETFs, ETNe are casgned to ack the performance ofthe underyng Index. However, nthe event of seer defeuiton an ETN, the ene invectment nthe ETNs may be lost Inte case of ETFs, the hqukd assets dry helé by the fund ate recoverable, An ETN does not guarantee retums or return of pineal @ The obligation to buy or sel the underlying assets in @ specified quantity 2 al specified price (the future price or delivery price), 1 ona speci fulure date (the delivery date or settlement date). '@ An investor wha expects the price ofthe underlying assets to appreciate adopts a ona position by agreeing to buy ‘and receive delivery of the underlying atthe delivery pice. 8 Similariy ithe expects the price to fall he adopts a short position by agreeing to sell and deliver the undertying at the livery price,'2 Financial futures are futures contracts based on financial instruments, such as currencies, equities, equity indices, interest rates. 12 Commodity futures are contracts based on physical commodiies: crude ol, gold, ele (ili ‘9 Futures are subject fo margin requirements and have partial settlements of emerging gainsfosses through daly mark-to-market process, ing Subtract rom the margin account he investor maintoin with his broker Futures contacts can be settled in two ways © Physical delivery where the underlying assets are deliveres by the seller tothe specified delivery lacation, ‘© Cash settlement winere the partes settle by paying (or receiving) cash forthe loss (or galn) related to the contract. ha :-~ in the contracts. TT Investor who holds 2 futures is obliged to buy! sel the Investor who holds an option i fre to decide whether to underying asset. buy! sel the underying asset1 Futures are traded on margin. 2 The intl cash outay is also called intial margin and sa fraction ofthe fll value ofthe contract. '2 The level of intial margin is usually set by the ftures exchange on which the contracts are vaded, based on the anticipated pce volaty 12 The broker may add adtional margin requirement for specific clans, products or markets based on risk analysis. ‘2 The ably to trade at a fraction ofthe valve ofthe contract creates the leverage eect of futures trading. 2 A futures contracts marked to market on a daily basis. 1 The broker issues a margin call when the inital margins eraded by losses, and fals below the minimum margin requirement (the maintenance margin). .© The aditional amount required to restore the account othe inal margin is called variation margin. «@ Ifthe margin calls are not mel, the broker has the righ! o liquidate the holdings inthe futures to aise the necessary ammount. Click on the icons to view the respective exam © C) Mustration: Uniquely Example: How margins work Extended Settlement Contracts ‘SGX MSCI Singapore Index Futures ('SG") Ina! Margin 1M $2,500 Maintenance Margin [MM] ‘82,000 When you buy SG (Le. take a long postion), you will need to deposit $2,500 as IM. ‘Scenario 1_~ Margin Amount Drops Below MM Ifthe value of SG crops by $1,000 from your purchase price, the loss is offset against your margin account of $2,500, bringing it down to $1,500. Your margin amount is nowr below the MM of SG. ‘Your broker wil issue a margin call, requesting a top-up lo restore the account balance tothe intial margin of $2,500. ‘Sconario 2 ~ Margin Amount Drops But Remains Above Mi Ihe value of SG crops by $300, your margin account is reduced to $2,200. Your margin amount remains above the Mor so. No margin calls made, even though itis below the inal margin,Extended Seltement (ES) contracts are classified as futures contracts under the Securiies and Futures Act (SFA). ‘An ES contract isa coniract between two parties, to buy or sel (2) specific quantiy (eg. 1,000 shares) of () specific security (e.g. SIA) at (6) specific price (2.9. $15.00) for final settlement at (4) specific future date (le. when the contract matures or expires). When an investor buys or sells an ES contract, the investor must pul up margins of between 6-20% ofthe contract value to brokers, Key Features of the ES Contracts © Commence trading on the 25th of the month immediately preceding the contract month. © Coase trading on the last market day of the contract month (also known as Last Trading Day). 1 Each ES series has tenure of approximately 35 days, 9 There is a consistent averlap period for customers to ‘roll ever thelr positions in ES contracts. Settlement of ES. contracts takes place by way of delivery of the underlying securities on the third market day after the Last Tracing Day (LTD +3) © OnLTD +3, ES contracts are seitied in the same manner as ready market trades ‘9 Payment and receipt of the purchase and sale consideration, respectively, wll take place in aocardance with the = ‘Leverage | the market moves again! you, the losses you suffer From trading fulures willbe greater in percentage: Risk terme than the movement in the undarying sat. iquidity | There eno assurance that aiquid marke wil exist for ofeeting a futures contract that you have previously Risk bought or soli: ~ Afututes rice has inereased or decreased by the maximum allowable daly iit = There is no ene presenty wiling to buy the futures contact you want to sll or sel he fuses contacts you wantto buy. Market Risk | ifthe market moves agains yu, the losses willbe debited from the margin account. This Is done on an ongoing basis. Ifthe margin account falls below the maintenance margin, a margin calls inated which requires @ top up ‘back to the inti margin, ofa reduce the pumber of epen contracts. Fang which, the broker may force: liquidate the positon Click onthe conto view the risk profil ofa futures contract (ong postion).Profit Payout of long fus! oll futures contrac Maxirnum joss i theory unlimited OllPrice Loss Suppose the September 2011 delivery fuel ol contract with price of $500 has an initial margin of $100 and maintenance margin of $80. The profi on this fuel ci futures contract increases correspondingly with tne increase in ol price. Theoretically there is no upper cap on the profit ‘When the cil price drops below $480, a marain call may be tiqgered. The loss can be more than the Cartficates ae investment products issued by a third-party financial institution (usually an investment bank) to enable an Investor to benefit fom afferent price tends ofthe underlying asset © Coniicates are susceptible io rsks similar to those of warrants: leverage risk, issuer risk, market risk, quilt isk and ‘maype foreign exchange risk. 1 Prout features may vary trom issue to ssue. Two products by the same name, offered by two diferent issuers, may have diferent product features, © The diferent features may ecultin diferent risks. in investor should be clear about the features before they invest in 2 coticate.Cees Wie wll eaver ane euch certiate in the section ~ Disecunt Cerificate © ADiscount Corifiate allows you to buy the underving asset at a discounted price © the price of he underyng rises beyond a specified level (alld cap stske), the investor receives only the cap strike ‘amount at matty f te cereale. n other words, there (sa ap lo he pozental upside galn, a exchange fr he scoured price, Click onthe icon to view an example. Example ABC current share price Tenuee of discount ceriieate on ABC = 6 months Cap Stnke of discount ceticate on ABC = 53.50 Price of escount catfeata on ABC = $8 0, _ALmatu. the investors receive ether the ABC shares (Scenario 1) or the cap strike (Scenario 2), depending onthe spot (or marke) price of ABC shares ico: $8.80 Cap Strike: $9.50 ~ ‘Scenario 1: Spot price is below cap strike ($9.50) — The ‘Scenario 2: Spot price is at or above Investor receives one ABC share, ‘cap strike ($9.50) - The investor racwives the cap stike of $8.50. The pay-out is ‘Scenario 1a: Spot price is Scenario tb: Spot price Is fyegregarciess ofthe actual market bbolow issue price ($8.80)- above issue price ($8.80)- yalye gf ABC share. Therelore, he ‘The investor sufers alos. Thelnvestorrealizes again maximum return ie capped at 7.95% for However, the loss ic lower than since the share price is ov the grmonth period that of dractinvestmentin his purchase price ‘ABC share, because he paid 2 ‘discounted price forthe share,(CBBCs are nancial products Issued by thir patyIsuers and have he flloning fetus: © Folow closely the price performance of an underyng asset, ether an index o ingle stock © Leverages, towing invesios to gan exposure tothe underying 2598 aa action a ts pre. © leeued as bull or bear contacts wih fend expr date and exerelee tke level, allowing investor o tke upward or ‘Sownward views onthe underng, © lesued withthe conden that they wil be called by the issuer before the expiry date when the undetvng asset pice reaches ‘he cal lve (cal ce), ' When the CBBC is called by the issuer, an investor wil no longer b know a the mandatory call event ('MCE"} orknoek-out event oto trade the CBEC on SGX-ST. Thisie eee atts trad me es ~ eee cs ZN ce Bull Contract Bear Contract, Call Price & Strike Price Call Price = Stike Price Tnvestor Buys a bull f he holds a bullish view ofthe | Investar buys a bear Phe holds a bearish view of he underlying. underlying.‘The 2 Types of CBBCS ie ee eer eee Bee [No residual value when MCE ocours. Investors may receive a residual valve when a MCE occurs, Click on the icons to know more. What happens when an MICE occurs? What happens ia CBBC trades ti expiry without a MCE? ‘An investor may possibly receive a residual value when an MCE occurs during the life of the CBBC. Contract Recklual Value ] Bull, ‘Settlement level of the underlying asset - Strike lene C886 (ested comersonato_|_ Wee Satlner nl ibe he lo and foreign & je rale where applicable) ar ne = u ‘the underlying from the time of the MCE and Gear |Site eve fe CBBC- Seinen leet cre eetefve nated sosion Seowmy scliahsatyconenorren” | ‘malheendtte natin ses re eee eee) Where the Settlement level willbe the lowestInvestors whe hold @ CBBC at expiry may receive 2 cash settlement amount. Contract Cash Seitlement Amount ‘Bull Soiilemant level ofthe underlying asset — Strike level ofthe CBBC. winere the Sattiement level vil be the closing So coe ecco Oa level of the underiying asset on the last trading exchange rate where applicable) {ay ofthe or the final settlement price ofthe ‘Bear ‘Strike level ofthe CBBC - Settlement evel ofthe | relevant index futures Underlying asset (adjusted by conversion ratio and foreign, exchange rate where applicable) There willbe no residual value if the settlement level is equal or less than the strike level fora bull contract (equal cor greater than the strike level fora bear contract) PE “The price changes of a CBBC tend to follow closely the rice movement ofthe underlying asset the underying asset increases in value, bull with enttement ratio of 1 to 1 general increases in value by approximalely the same amount 2 bear CBBC wih enttlement rato of 1 to 1 generally decreases in value by apprewimataly the same amount Inather words, the deta of @ CBBC is usually close to one, cE ari wecis eevee feed a {2 The intinsic valves the major component ofthe value * The financing cost refers to the funding casts or str Theintinge abe he mao tee tt saa nani enor ang betaine Pero + ra Vauw "= Spot price of underlying asset ~ Strke Price of CBBC * Generally declines as the time-to-maturity shortens, (Bull Contract}; oF Investors should note that price changes in the CBBC may trike price of CBEC(Bear Contract) — Spat price of become volatile when the price of the underlying asset is. underlying asset close to the call price of the CBBC, or if liquidity in the ee ee, ae Click on the icon to view an example.‘ABC Spot price 3100 ‘Strike price 380 Call price 385 Funding cost (5%) 4 Entitlement Ratio 72 1 Share Price at issue $24 (=$100- $80 + $4) ‘Scenario 1: Spot price falls to call price; MCE occurred: ‘Spot pri 385 (= 15% decine) Settlement price ‘583 (lowest traded level from MCE to the next trading session) Payout (theoretical) 53 (ssettioment price — strike, 87.5% loss) ‘Scenario 2: Spot price does not reach call level bofore expiry; At maturity: ‘Spot price {5120 (=20% appreciation) ‘Settlement price {5420 (closing price on ast trading day) Payout (theoretical) ‘540 (settlement price - strike, 60% gain) As illustrated in Scenario 1, investors may receive part ofthe uptront premium paid fr the CBBC when the price of the Lndertying moves adversely against the investor and crosses the cal level, However, since the contract is called and terminated early, the investor wil not benefit from any subsequent rebound of the underying asset CBBC -Risk (CBBC are sueceptble to al the common ks iantfed earlier: leverage risk, markat ik, sever rik and feregn ‘exchange risk Click each typeof risk to learn moro Produc speiic Risks | Leverage Rok iy Rk eke Rik ese ike Mandatory Cal Event (°MCE") Feature When @ MCE ovcurs, CBBC wil te-miate trading and expire early. Any trade executed at and after the lime of the MCE are invals and wil be eancalles accordingly, Trading near Call Price \Wnen the underbing asset ofa CBBC is trading ata price cos tts call price, the change inthe valve ofthe CBBC may be ‘more velatle and dspeaportionate withthe change the value ofthe underiyng asset, For example, asa bull CBBC approaches MCE, the price ofthe CBBC may fll by a greater proportion cue to the decrease in ‘he value ofthe nancing ont aa the risk ofthe product expiring ear increases, ‘Sere Investors may also Se the CBBC to cap thelr loss while other Investors are less waling to buy the product hat may be called anytime,Prout Series |__teverage i ligt | Maren sk | serie | (0880s are leveraged instruments While leveraged products allow investers to magni thei gains, investors are also exzosed toa larger percentage loss in he ‘even the underying asset moves agains! expectations Proht Specic Rieke | Leverage Rick |_tigty Rik Morkerik | ser ik ‘The market-maker may be the only parlipant buying and seling the contracts and there may be elrcumetances where invesiors may not be able to buy or sell CBBCs atthe prices desired, Product pect Risks Leverage Risk Lut Rsk Marke is Iuer Risk Value of the CBBCS is susceptible lo prevaling market forces, including demand and supply of the CBBCs.Produ peti isks | Leverage Risk Liu isk | Mater isk suri ‘The contracts are unsecured contractual obligations ofthe issuer. lhe issuer is unable to meet its obligations under the contacts, he investor may lose the entire investment ‘You have gone through he tutorial on SGXIsted Specified Investment Prodts, which covered the fling PEEL [Bf come opt ost a Ff Thr be ewes nd aoc Bes Ey tevnercoe as It there ae items you are nt clear about, you may go back and review the content More information on the produce canals be found on webaita of tha respective aauere or SGX website ‘You may appreach your CMS lensed broker f yeu want te rade in Speciied Investment Products. wove, invostors should satisty themselves thot they fully understand the reduc features and risks of drivatves bofore investing in thom. i :