BNP Paribas has issued a new series of Mini Future Certificate on the volatility indices VIX Futures and VSTOXX Futures. In particular, these are the first Mini Futures issued in Italy on these two particular underlying assets, whose function is to measure the expected volatility on the stock markets.
In detail, the VIX Indexalso known as the fear index, and the related Futures contracts, measure the volatility expectation of the US stock market, and are calculated based on the weighted prices of the 30-day call and put options on the S&P 500. The Vix Index and the he American S&P 500 index historically have an inverse correlation and therefore if the S&P 500 rises, the Vix usually falls, and vice versa.
Il VSTOXX Indexon the other hand, measures the expected volatility on the European market: that is, it expresses an implicit volatility measure of the Euro Stoxx 50 index, the index of the 50 European blue chips.
Dynamic lever
These new Mini Future Certificates are characterized by the possibility of investing in leverage is on the upside (Mini Future Long) than to the downside (Mini Future Short), and allow the investor to use only a portion of the capital that he should have used to directly purchase the underlying asset, as well as a marginal impact of volatility on the price.
Among the main advantages offered by the Mini Future Certificates, the possibility of amplifying the movements of the underlying thanks to the use of dynamic leverage and, unlike the “fixed lever” certificates, the absence of the compounding effect. In fact, when a certain Mini Future is purchased, a certain level of Financial Leverage is fixed, which remains unchanged until the closing of the relative position, while in fixed-lever investment products, the financial leverage is fixed only on a daily basis. , which causes a misalignment over the medium term due to the so-called “Compounding effect”.
Therefore, thanks to the dynamic leverage, Mini Futures allow you to implement broader strategieswithout having to rebalance the position every day.
Knock Out Level
These Certificates are also characterized by the presence of a level of Knock out which, once reached, determines the early expiry of the certificate, so it is not possible to lose more than the invested capital. This level is updated daily according to the same mechanism as the Strike and is higher than the Strike value for the Mini Long and lower than the Strike value for the Mini Short.
“Given the high degree of uncertainty and sustained levels of volatility that characterize the markets in this period, we have decided to focus on the VIX and VSTOXX indices to allow investors to take advantage of this particular context by launching a new range of Mini Futures on these specific underlying, the first in Italy. Comment Nevia Gregorini, Head of Exchange Traded Solutions of BNP Paribas, who continues “this issue, like all Mini Future Certificates of BNP Paribas, has various levels of Leverage, in both long and short versions, on the same underlying, so as to allow investors to choose the one that best suits your investment objectives. Furthermore, thanks to the absence of the compounding effect, the Mini Future Certficates are also ideal for implementing portfolio hedging strategies “
More information on the new Mini Future Certificate range is available at https://investimenti.bnpparibas.it/