Turbos

What are Turbos?

Turbos (formally know as Listed Contracts for Difference or CFDs) are powerful investment tools for UK investors. They combine the flexibility of a Turbo contract with the price transparency of a London Stock Exchange listing. Most importantly, Turbos are much lower risk products than traditional CFDs - each Turbo contract embeds a guaranteed stop-loss at no extra cost, which puts you fully in control of your maximum possible loss at all times. This means that with a Turbo you can never lose more than your initial margin payment, no matter how badly the market moves against you or the length of time it is held.

How do they work?

• Leverage
  Turbos work in a similar way to unlisted CFDs. In order to gain exposure to a given asset such as a share or index, an investor is only required to put up a margin (typically between 5% and 15%) for the amount they wish to control. Once an investor holds the Turbo, for each 1 pence movement in the underlying security, the Turbo will move 1 pence. Therefore the investor is enjoying the full exposure to the underlying security movements at a fraction of the cost.
• Financing and Dividends
  When you are holding a long Turbo you are purchasing shares on margin and incur a financing fee on the amount you borrow. For unlisted CFDs this fee is charged to your account on a daily basis, which makes it difficult to identify the true cost of the trade when opening the position. For Turbos, however, all financing fees and dividends are included on the initial price. The value of a long Turbo is reduced by a fixed amount overnight to reflect the daily financing fee, with no additional payments required. Similarly, any financing fees you are due to receive from a short position or dividend payments you are due to make, are factored into the price of the Turbo at its issue.
  This enables Turbo investors to know the total cost of their investment upfront, whereas with unlisted CFDs the total cost of entering into a contract is not known and is not limited to the investor’s initial investment but is in fact unlimited.
• Trade both Long and Short
  A Turbo trader can make money in both a falling and rising market simply by trading either a long or short Turbo.
• Going Long
  To buy shares that you expect to rise in value, so as to sell them at a later date to make a profit, you would open a 'long' position.
• Going Short
  You would open a 'short' position to trade a share that you expect to fall in value, so as to buy them back at a cheaper price. The difference between the opening and closing price would be counted as profit should the price fall as expected.
• No Margin Calls
  The provider of a Turbo will require an investor to maintain the margin level throughout the life of the trade. This may require additional margin payments, which can often come at the most unwelcome time - when a trade is moving against you. With a Turbo there are no margin payments even if the trade moves against you. However if the stop loss level is hit, the position is automatically closed out.
• No Stamp Duty
  There is no Stamp Duty to pay on Turbos as you are buying a derivative and not the physical underlying security.

Which accounts can I trade in Turbos?

You can invest in Turbos through our Trading account.

How risky are they?

Turbos are not suitable for all investors. You should not deal in Turbos unless you understand their nature and the extent of your exposure to risk. While your maximum loss is limited to the initial margin payment you make, you should not open a Turbo position unless you are prepared to lose the entire margin payment plus any commission charges incurred. You should be satisfied that they are suitable for you in the light of your circumstances and financial position. If you are in any doubt you should consult an appropriately qualified financial advisor.

Download more information about Turbos and the risks involved