DAILY LEVERAGE

 STRIKE WITH 5 TIMES MORE POWER

 

Markets don’t typically move too far in just a day, so investing directly in an stock, index or commodity can be a limited endeavour unless you are trading in sizeable quantities. For those with a more modest budget, Daily Leverage can provide the opportunity to gear up your exposure by five. This means that £100 invested in a Daily Leverage product can provide the same exposure as investing £500 directly in an Underlying Asset. We call this ‘Leverage’, and it simply means that every 1% move in the Underlying Asset translates to a 5% move in the price of a Daily Leverage product.


HOW DO DAILY LEVERAGE PRODUCTS WORK?

Daily Leverage products track the performance of leveraged Underlying Indices which are independently calculated by FTSE, and aim to amplify the daily return of the FTSE 100 on a close-to-close basis by five. If the FTSE 100 moves by 1% in a day, the value of the Index will move by 5%. The price of a Daily Leverage product will simply rise or fall in line with the leveraged index that it tracks.

Both Long and Short FTSE 100 x5 Indices include a stop loss mechanism, which triggers a re-set of the Index if it falls by 75% in a day. This aims to stop the Daily Leverage from dropping below zero and means that your risks are fixed to the amount that you invested.


CHOSING A DAILY LEVERAGE

When your time horizon is just a single trading day you need the flexibility to trade both rising and falling markets.

  • Daily Long 5s are for the bullish investor who believes that the Underlying Asset is set to rise over the day, and wants the opportunity to enhance their returns by a factor of 5. As a long investment, a Daily Long 5 will rise by 5% for every 1% rise in the underlying.
  • Daily Short 5s are for the bearish investor who believes that the Underlying Asset is set to fall over the trading day, and wants the opportunity to enhance their returns by a factor of 5. As a short investment, a Daily Short 5 will rise by 5% for every 1% fall in the underlying.

AN EXAMPLE TRADE

The best way to demonstrate how a Daily Long 5 works is to look at an example. Let us assume that markets are about to open on Tuesday. On Monday the FTSE 100 TR closed at a level of 5,000, the FTSE 100 DL5 closed at a level of 22,000, and the Daily Long 5 closed at £100 per unit. As you believe that the
FTSE 100 TR is set to rise on Tuesday, you purchase 10 units of the Daily Long 5 at a total cost of £1,000. You would execute this trade through your stockbroker in exactly the same way as you would buy a share.

If later that day the FTSE 100 TR had increased by 1% to a level of 5,050, the value of the FTSE 100 DL5 would have increased by 5% (1% x 5) to a level of 23,100. Because the Daily Long 5 simply tracks the FTSE 100 DL5, it too would have risen by 5% before Costs & Fees. Fees only apply on investments that are
held overnight or longer. See page 11 of the Product Guide for a full explanation of the Costs & Fees associated with trading Daily Leverage Products.

With the potential for such high returns, you also face a high level of risk. If the FTSE 100 TR was to decrease by 1% in a day, the value of the Daily Long 5 would also decrease by 5%. 

Prices are indicative and used for illustrative purposes only


USEFUL LINKS

Trading such a short time frame and using leverage can be very rewarding, but it can be risky. You can use the materials below to find out more about Daily Leverage and trading the markets on a daily basis:

  

 

  • Watch the LSE video on the Daily Leverage products above  
  • Watch our Day Trading Special Event from October 2012 above

TRADING DAILY LEVERAGE

Daily Leverage are investment products that are listed with live pricing publicly available on the London Stock Exchange (LSE) and trade like a share through your existing stockbroker account, or Self Invested Personal Pension (SIPP)* at any time during LSE market hours (08:15 / 16:30).

The minimum trading amount for a Daily Leverage product is one unit, which costs £100 at launch. Trading Daily Leverage products are subject to the following costs: 

  • An Annual Management Fee equivalent to 0.70% per year will be applied to your investment and will be taken from the price of the product daily at approximately 0.01918% per day.
  • Bid/Ask spread; There is a small difference between the price at which you buy – the ‘Ask’ price, and the price at which you could sell – the ‘Bid’ price. This difference in prices is called the ‘Spread’. The wider the spread, the greater the cost will be of selling back your product.

Unlike a UK share purchase, you will not be charged the 0.5% Stamp Duty usually incurred*.


KNOW YOUR RISK

  • Counterparty Risk – Daily Leverage are issued by Societe Generale Acceptance N.V., a member of the SOCIETE GENERALE group of companies. Any failure by Societe Generale to make payments due under the Daily Leverage product may result in the loss of all or part of your investment. You will have no claim for compensation from the Financial Services Compensation Scheme or any other scheme where the Issuer is domiciled.
  • Capital at Risk – Capital is fully at risk, we recommend that you consult your independent professional advisor before investing
  • Leveraged returns - Leveraged returns are a major advantage of Daily Leveraged products but can also work against investors. Investors should be aware that, if the Underlying Index moves in the opposite direction to that anticipated by investors, the losses incurred by the Daily Leverage product will be greater in percentage terms than those incurred by a direct investment in the Underlying Asset itself.
  • Compound returns - As the product is reset on a daily basis, your capital could erode very quickly following a continued succession of positive (Daily Short 5) or negative (Daily Long 5) performance of the Underlying Asset.
  • Underlying Risk – The Underlying Assets may be complex and subject to fluctuation
  • Liquidity Risk / Early Sale Risk – Societe Generale is the only market maker and therefore the only party providing prices for the Product. Trading prices will only be available in normal market conditions. You can sell a Daily Leverage product before the end of its term but may get back less than you invested irrespective of the performance of the Underlying Asset.

We recommend that you study the Product Guide and Final Terms of your chosen product and seek advice from an independent professional adviser before making an investment decision.


IMPORTANT INFORMATION

Daily Leverage are directed at sophisticated retail clients in the UK, who have a good understanding of the underlying market and characteristics of the products.

The information within this brochure does not constitute legal, tax or financial advice. Societe Generale has not given any such advice.

Daily Leverage are securities that are listed on the London Stock Exchange (LSE) and are issued by Societe Generale Acceptance via an Issuing Programme which is approved by the UK Listing Authority. SG Issuer is a 100% subsidiary of Societe Generale.

Although these products are issued by SG Issuer they are guaranteed by Societe Generale. If SG Issuer as the Issuer, and Societe Generale as the Guarantor were to fail to make payments due, you could lose some or all of your investment. Investors are ultimately exposed to Counterparty Risk on Societe Generale, in its capacity as Guarantor. See page 10 for more information on Counterparty Risk.

Final Terms are published for all Daily Leverage detailing their specific characteristics and their pay-off, and the
product features given in the Final Terms are prescribed by the approved Base Prospectus. Both documents can be found at www.sglistedproducts.co.uk

Capital is fully at risk. Daily Leverage are not covered by the provisions of the Financial Services Compensation Scheme (“FSCS”), nor any similar compensation scheme.

You should read the Product Guide and Final Terms carefully so that you understand what you are buying, and then keep these documents safe for future reference.
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