The potential profit from this type of product is calculated automatically depending upon the criteria and likelihood of the scenario set by the investor. If the prediction turns out to be correct, the investment makes a profit. If, on the other hand, the prediction proves incorrect, the investor is still returned a proportion of investment based on the level of capital protection they set.
Keep in mind that if you set a price boundary close to the current price, then your potential return will be low. Conversely, if you set a boundary some distance away from the current price, then the potential profit is much higher.
Investors in this product must choose a boundary which the price of the underlying asset either "will touch" or "won't touch".
You purchase a touch product based on EURUSD, predicting that the price of EURUSD will touch 1.31 within the next 60 days. You set the capital protection level at 95%. After choosing these options for your product, your minimum initial investment (600 USD) and your potential return on investment (110% per annum) are generated for you automatically.
If after 60 days the price of EURUSD has reached 1.31 at least once, as you had predicted, you will get back your initial investment plus 110 USD (600 × 110% / 12 × 2 = 110). If the price of EURUSD does not reach 1.31, you will get back 95% of your initial investment.
You purchase a touch product based on USDJPY (initial price: 78.56), predicting that the price of USDJPY won’t touch 78 over the next 30 days. You set the capital protection level at 95%. After choosing these options for your product, your minimum initial investment (700 USD) and your potential return on investment (60% per annum) are generated for you automatically.
If after 30 days the price of USDJPY hasn’t reached 78, as you had predicted, you will get back your initial investment plus 35 USD (700 × 60% / 12 = 35). If the price of USDJPY does drop to 78, you will get back 95% of your initial investment.
Let's say you purchase a touch product, choosing EURUSD as your base asset (initial price: 1.2538). You predict that the price of EURUSD "won’t touch" 1.27 over a 1-month period. You set the capital protection level at 95%. Based on the option you have chosen for your product, you are given a minimum investment level of 1,000 USD and a potential return of 98% per annum.
This means that if the price level of EURUSD does not touch 1.27 over the 1-month period, you will receive a return on your investment. You will get back your initial investment of 1,000 USD in full, plus an additional 81.6 USD (1000 × 98% / 12 = 81.6).
If the price level of EURUSD touches 1.27 at any time during the 1-month investment period, you will still get back 95% of your investment.
What will happen if I lower the capital protection level to 90%?
Assuming you keep the other parameters of your investment the same, you will get a lower minimum investment level (850 USD) and a higher potential return (171%).
If EURUSD stays within the price corridor you set, you will get back your initial investment of 850 USD, plus an additional 121 USD (850 × 171% / 12 = 121). If the price touches 1.25 or 1.27, you will get back 90% of your investment.
What will happen if I leave the capital protection level at 90%, but widen the corridor between the upper and lower boundaries?
Let's replace the boundary level of 1.27 with 1.28. By widening the "corridor", you are making a more conservative prediction. Consequently, this product will have a lower potential return (67%) and a higher minimum investment level (950 USD). If the boundary level isn't touched over the 1-month period, you will get back your initial investment of 950 USD, plus an additional 53 USD (950 USD × 67% / 12 = 53).
If the price does touch 1.28, you will get back 90% of your investment.Invest in a touch product
Here are some of the questions we get asked most often about structured products:
For more, please see our entire list of structured product FAQs.
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