This questionnaire/tutorial has been created by Boost ETP to assist advisors and investors in understanding the benefits and the risks of investing in Short and Leverage Exchange-Traded Products (ETPs). ETPs include Exchange Traded Funds, Exchange Traded Commodities and Exchange Traded Notes.
Please review the Boost ETP Tutorial on Short and Leveraged ETPs before you begin the text.
There are a 10 multiple choice questions within the text.
Answers are provided at the end of the test.
1. ETP stands for:
a) Exact Trading Product
b) Extreme Traded Product
c) Exchange Trading Program
d) Exchange Traded Product
2. Which of the following replication methods is not possible to achieve short or leveraged returns?
a) Index swaps
d) Physical replication
3. Crash Protection: Following an intra-day rebalancing, investors will get:
a) An increased participation to any rebound in the underlying index
b) A decreased participation to any rebound in the underlying index
c) There will be no effect to participation following an intra-day rebalancing
d) There will be no participation to any rebound in the underlying index
4. Liquidity: Who are able to create and redeem S&L ETPs
a) Authorised Participants
b) Investors through a brokerage account
c) Brokers on exchange
d) Investors directly with the ETP Issuer
5. ETPs involve numerous risks including
a) General market risks relating to the relevant underlying index only
b) General market risks relating to the relevant underlying index and credit risks on the provider of index swaps utilised in the ETP
c) General market risks relating to the relevant underlying index and credit risks on the provider of index swaps utilised in the ETP and exchange rate risks
d) General market risks relating to the relevant underlying index and credit risks on the provider of index swaps utilised in the ETP and exchange rate risks, interest rate risks, inflationary risks, liquidity risks and legal and regulatory risks.
6. Boost Short and Leveraged Daily ETPs typically rebalance their leverage:
d) At the end of every index trading day
7. What is the normal settlement period for a Boost 3x Leverage Daily ETP settled in the UK?
8. Which of the following investment objectives would not be suitable to use a Boost FTSE 100 3x Short or Leverage Daily ETP?
a) To achieve a similar delta one exposure of the FTSE 100 but only using only a third of the capital
b) To achieve 3x performance of the FTSE 100
c) To take advantage of short term price fluctuations of the FTSE 100
d) To achieve 3 x performance of the FTSE 100 with a guaranteed minimum return
9. Which of the following statements about S&L ETPs is correct?
a) Short and leveraged ETPs typically provide for collateral protection
b) An investor in short and leveraged ETPs can lose more than their initial capital
c) Similar to CFDs and spread betting, an investor will be required to post margin
d) Short and leveraged ETPs are close- ended
10. Which of the following statements about S&L ETPs is incorrect?
a) Short and leveraged ETPs are designed to achieve positive or negative multiple returns of an index, sector or asset
b) Short ETPs allow investors exposure to the inverse daily returns of an underlying index, sector or asset
c) Leveraged ETPs allow investors exposure to the inverse daily returns of an index, sector or asset
d) Leveraged exposure allows investors to use less capital to achieve a similar delta one return, or magnify returns using the same amount of capital
1. D ETP stands for Exchange Traded Product.
2. D Trading the physical underlying asset will not allow for leverage returns.
3. B Whilst an intra-day rebalancing reduces the sensitivity to further falls on a trading day, the investor will have reduced participation if the index rebounds.
4. A Only Authorised Participants can create and redeem in the primary market.
5. D ETPs involve numerous risks including general market risks relating to the relevant underlying index and credit risks on the provider of index swaps utilised in the ETP and exchange rate risks interest rate risks, inflationary risks, liquidity risks and legal and regulatory risks.
6. D Boost Short and Leverage Daily ETPs rebalance their leverage at the end of every index trading day.
7. D The settlement period is T+3.
8. D Investors can lose up to their initial capital, therefore there are no guaranteed minimum return.
9. A S&L ETPs are typically collateralised: Boost Short and Leveraged Daily ETPs are over collateralised.
10. C Leveraged ETPs allow investors exposure to the multiple positive daily returns of an index, sector or asset.
This communication has been provided by Boost ETP LLP which is an appointed representative of Mirabella Financial Services LLP which is authorised and regulated by the Financial Conduct Authority.
The products discussed in this document are issued by Boost Issuer PLC (the “Issuer”) under a Prospectus approved by the Central Bank of Ireland as having been drawn up in accordance with the Directive 2003/71/EC. The Prospectus has been passported from Ireland into the United Kingdom and is available on the websites of the Central Bank of Ireland and the Issuer. Please read the Prospectus before you invest in any Exchange Traded Products (“ETPs”). Neither the Issuer nor Boost ETP LLP is acting for you in any way in relation to the investment to which this communication relates, or providing investment advice to you. The information is not an offer to buy or sell or solicitation of an offer to buy or sell any security or investment. You are advised to seek your own independent legal, investment and tax or other advice as you see fit.
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. An investment in ETPs is dependent on the performance of the underlying index, less costs, but it is not expected to match that performance precisely. ETPs involve numerous risks including among others, general market risks relating to the relevant underlying index, credit risks on the provider of index swaps utilised in the ETP, exchange rate risks, interest rate risks, inflationary risks, liquidity risks and legal and regulatory risks.
ETPs offering daily leveraged or daily short exposures (“Leveraged ETPs”) are products which feature specific risks that prospective investors should understand before investing in them. Higher volatility of the underlying indices and holding periods longer than a day may have an adverse impact on the performance of Leveraged ETPs. As such, Leveraged ETPs are intended for financially sophisticated investors who wish to take a short term view on the underlying indices. As a consequence, Boost ETP LLP is not promoting or marketing Boost ETPs to Retail Clients. Investors should refer to the section entitled "Risk Factors" and “Economic Overview of the ETP Securities” in the Prospectus for further details of these and other risks associated with an investment in Leveraged ETPs and consult their financial advisors as needed.
This marketing information is derived from information generally available to the public from sources believed to be reliable although Boost ETP LLP does not warrant the accuracy or completeness of such information. All registered trademarks referred to herein have been licensed for use. None of the products discussed above are sponsored, endorsed, sold or promoted by any registered trademark owner and such owners make no representation or warranty regarding the advisability on dealing in any of the ETPs.
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