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Tutorial: Index/Participation certificates

WTI or BRENT CRUDE Index/Participation certificates

Price of a WTI Index/Participation certificate = price of the nearest WTI futures contract x RATIO x USDCZK.

Price of a BRENT CRUDE Index/Participation certificate = price of the nearest BRENT CRUDE futures contract x RATIO x USDCZK.

Therefore, the performance of this WTI/BRENT CRUDE Index/Participation certificate depends on the performance of the WTI/BRENT CRUDE futures contract, the RATIO and FX rate of USDCZK. The certificate always monitors the nearest WTI/BRENT CRUDE futures contract on the NYMEX/ICE Stock Exchange. stock exchange. Of course, the certificate has unlimited maturity. Thus, the roll-over or “rolling” of the contracts must take place regularly every month shortly before the expiry of the nearest futures contract.
Roll-over means that an expiring futures contract is sold and the next nearest futures contract is bought. There may be or usually is a change in the RATIO during roll-over. On the one hand, roll-over is encumbered by selling and buying costs of futures contracts and, on the other, there may be losses or profits.
Profits during roll-over arise when the price of the expiring futures contract is higher than the price of a new futures contract (so-called “backwardation”). More could be invested in new futures contract and the RATIO rises.
Losses during roll-over arise when the price of an expiring futures contract is lower than the price of a new futures contract (so-called “contango”). And so less may be invested in the new futures contract and the RATIO falls.
The higher the RATIO the more the client participates in the growth of the WTI futures contract.
The increase of the USDCZK exchange rate (so-called weakening of the crown against the USD) supports the rise of the WTI/BRENT CRUDE certificate price. In contrast, the fall in the USDCZK exchange rate (so-called strengthening of the crown against the USD) supports the fall of the WTI/BRENT CRUDE certificate price.

Index/Participation certificate for gold or silver

Price of a Index/Participation certificate for gold = spot price of gold x RATIO x USDCZK.
Price of a Index/Participation certificate for silver = spot price of silver x RATIO x USDCZK.
RATIO is constant throughout the lifecycle of a certificate. The certificate has unlimited maturity.
The performance of this Index/Participation certificate for gold/silver therefore depends on the performance of the price of gold/silver and USDCZK exchange rate.
If the USDCZK exchange rate were fixed, the certificate reflects the price movements of the underlying asset (gold/silver) at a ratio of 1:1.
The increase of the USDCZK exchange rate (so-called weakening of the crown against the USD) supports the rise of the certificate price. In contrast, the fall of the USD exchange rate (so-called strengthening of the crown against the USD) supports the fall of the certificate price.

Your advantages

  • If the prices of the underlying asset rise (WTI crude oil, oil BRENT CRUDE, gold, silver) you participate in this rise.

Details you should be aware of

  • Declining markets cause losses in Index/Participation certificates.
  • The WTI or BRENT CRUDE price of a Index/Participation certificate may fall during its lifecycle to 0 CZK and subsequently the certificate can be delisted, therefore resulting in the loss of the entire investment. This will occur in a situation when the price of a monitored WTI or BRENT CRUDE futures contract falls to 0 USD or below 0 USD or if, during the roll-over of contracts, the price of the old or new futures contract will be equal to 0 USD or will be below 0 USD.
  • The performance of a certificate is positively or negatively affected by the trend of the exchange rate between the currency of the certificate (CZK) and the currency in which the underlying asset is traded. If CZK strengthens, the certificate price falls, if CZK weakens, the certificate price rises.
  • The investors bear the risk of issuer (Erste Group Bank AG).




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