Complex product risks

Below is an overall description of the characteristics of certain complex products, their markets, and the risks associated with these products.

Trading financial products always involves risk. As a general rule, you should only trade financial products if you understand both the products and the associated risks.

Foreign exchange trading

When trading foreign exchange (FX), the investor speculates on the price movement of one currency relative to another, where one currency is sold and the other is purchased. For example, an investor may sell British pounds (GBP) against the US dollar (USD) if they expect the USD to increase in value relative to the GBP.

The FX market is the world's largest financial market, operating 24 hours a day, from Monday market open in Sydney to Friday market close in New York. At Saxo, you can gain exposure to the FX market via FX spot, FX forward outright, and FX options.

The FX Spot market is used for immediate currency trades. At Saxo, FX Spot open positions held at the end of a trading day (17.00 New York Time) are automatically rolled forward to the next available business day.

FX forward outrights allow the client to agree today on an exchange rate at which currencies will be exchanged on a pre-determined future date.

FX options are contracts that give the buyer the right, but not the obligation, to exchange one currency for another at a pre-agreed exchange rate on a specified date. They may be used to hedge currency exposure or to take a position on future exchange rate movements. The buyer pays an upfront premium to the seller. For purchased options, the maximum loss is limited to this premium. For sold options, risk can be substantial and may be unlimited, depending on the changes in the underlying FX spot rate.

Saxo acts as counterparty to client FX transactions and quotes prices based on underlying market data.

As FX is margin traded, allowing positions larger than your funds alone would permit, small market movements can significantly impact your investment. This high risk in FX trading can lead to substantial gains or losses, potentially even exceeding your deposit.

FX products are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investor accounts lose money when trading forex with this provider. You should consider whether you understand how forex trading works and whether you can afford to take the high risk of losing your money.

CFDs

A Contract for Difference (CFD) allows you to speculate on changes in the value of an asset, such as shares, without owning the underlying asset. If your expectation is correct, you profit from the price difference multiplied by the size of your position (less applicable costs). If it is incorrect, you incur a loss equal to the price difference multiplied by the size of your position (plus costs).

The value of a CFD is derived from its underlying asset. CFDs are always traded on margin (see the previous section for information on FX margin trading), which means you only need to deposit a fraction of the full trade value. In most cases, Saxo acts as the counterparty.

CFDs are over-the-counter (OTC) instruments and are not traded on regulated markets. Instead, the underlying asset—such as a share—is typically traded on a regulated market, and the CFD price reflects movements in that underlying market. In some cases, positions may be hedged in the underlying market, but the CFD itself remains an OTC contract.

For individual share CFDs, both price and liquidity closely mirror those of the underlying share. Index CFDs, however, are OTC products where pricing is set by Saxo based on factors such as the underlying constituents, futures pricing, expected dividends, interest rates, and market liquidity.

Because CFDs are traded on margin, they allow you to take larger positions than your initial deposit would otherwise permit. As a result, even small market movements can have a significant impact on your position. While this creates the potential for higher returns, it also increases the risk of loss. If your total exposure exceeds your deposit, you may lose more than your initial investment.

CFDs are complex instruments and carry a high risk of rapid losses due to leverage. 64% of retail investor accounts lose money when trading CFDs with this provider. You should carefully consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Futures

Futures trading involves taking a position to speculate or hedge on the future price movement of a specific underlying asset. A future contract gives the holder a standardized obligation to buy or sell the underlying asset at a specified price on a certain future date. The underlying asset could be, for example, raw materials, agricultural produce, or financial products. Depending on the contract, settlement takes place either in cash (based on the price difference) or through physical delivery of the asset. Futures are always traded on margin (see more about margin in the sections about forex and CFDs above) and on regulated markets, either through direct trading in the exchanges’ trading systems or via privately negotiated transactions that are reported and cleared through the exchange.

As futures are margin traded and therefore allow you to take larger positions than you otherwise could with your account funds, small market movements can significantly impact your investment. Futures trading involves a high degree of risk, potentially leading to high gains or losses that exceed your deposit.

Options

An option contract is a derivative instrument that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of an underlying asset at a predetermined exercise (strike) price before or at a specified expiration date. The seller (writer) of the option assumes the corresponding obligation to buy or sell the underlying asset if the option is exercised.

A call option gives the buyer the right to buy the underlying asset, while the seller has the obligation to sell. A put option gives the buyer the right to sell the underlying asset, while the seller has an obligation to buy.

Options that are in-the-money at expiry are typically exercised automatically, in accordance with the standard exercise and settlement procedures established by the relevant exchange and/or clearing house. Investors may, however, instruct otherwise in certain circumstances.

Trading options involves high risk. Bought options may expire worthless, losing the initial investment (premium and costs), while sold options can result in substantial (potentially unlimited) losses. Saxo requires margin charges to cover potential losses on sold options, but losses can exceed the margin charged and you are liable for those losses.

If your total exposure on margin trades exceeds your deposit, you risk losing more than your deposit. If the underlying asset of an option is margin traded (i.e., another leveraged product), exercising the option results in a position in the underlying margin traded product with associated risks and margin liabilities.

By default, you are enabled to buy options (puts and calls). To enable writing/selling options, you can adjust your settings in the platform.

Options trading is highly speculative and not suitable for all investors due to the risks involved. Buyers and sellers of options should familiarise themselves with the types of options (put or call, bought or sold) and their associated risks.

Stock options

Final settlement of stock options requires physical delivery of the underlying stocks versus payment of the strike value in cash. If you hold a stock options position but lack the required cash or stocks, you will fail to meet the contractual obligation.

Final settlement occurs when the holder of a long option position exercises the right to buy or sell the underlying stocks on or, in the case of American-style options, before expiry. All in-the-money long option positions held by Saxo clients are automatically exercised at expiration. Prior to and on expiration, short option positions are assigned via a random assignment lottery. At expiry, there should be no "assume" procedure for delivering on short option positions. Instead of the assume procedure, the clearing statements from the broker should be used to reflect the true exchange expiry outcome. 

As a general rule, Saxo clients must take responsibility to meet the delivery requirements related to their option positions, especially when approaching expiry. Saxo will not pre-emptively act on client positions to avoid delivery failure.

If a client fails to meet delivery obligations, Saxo will act on behalf of the client and without the need to notify the client in advance to resolve the delivery failure. Saxo will resolve a short stock position by acquiring the required stocks at market price. Saxo will resolve a short cash position by liquidating any or all positions under delivery and, if available, any long option position that provided cover for a settling short option position. In the exchange traded options context, this will be referred to as default handling. Transactions executed for the purpose of default handling will be charged additional (substantial) commissions. Default handling will be performed by Saxo’s Electronic Trading Desk

 

Therefore, Saxo recommends closing positions before expiry to avoid delivery failures. Notwithstanding the above, if Saxo could be exposed to uncollateralised losses incurred by clients, Saxo reserves the right to act pre-emptively and close out some or all of the client's positions that could cause potential losses the client cannot carry on their account balances. Pre-emptive close-out will be conducted under the responsibility of Saxo’s Trading Risk team.

ETCs and ETNs (Exchange Traded Commodities and Exchange Traded Notes)

ETCs (Exchange Traded Commodities) and ETNs (Exchange Traded Notes) are exchange-traded products that derive their value from underlying assets such as commodities, indices, or other financial instruments. Unlike traditional funds, ETCs and ETNs are typically structured as debt instruments issued by a financial institution, and their value is dependent on both the performance of the underlying assets and the creditworthiness of the issuer.

ETNs are unsecured debt securities and do not provide ownership of underlying assets. ETCs may also be structured as debt instruments providing exposure to specific commodities or commodity indices. As a result, investors are exposed not only to the performance of the underlying asset, but also to the risk that the issuer may fail to meet its obligations.

Certain ETCs and ETNs may use leverage or provide inverse exposure to the underlying asset. Leveraged ETCs and ETNs aim to deliver a multiple of the daily performance of the underlying, while inverse products aim to deliver the opposite daily return. Due to daily resetting and compounding effects, the performance of such products over periods longer than one day may deviate significantly from the expected multiple or inverse of the underlying. This may result in losses even where the underlying asset performs favorably over the holding period.

As a general rule, Saxo clients must take responsibility for understanding the structure and risks of ETCs and ETNs, including issuer risk, leverage, and the impact of daily rebalancing mechanisms. Saxo does not guarantee that ETCs or ETNs will achieve their stated investment objectives over any holding period.

The price of ETCs and ETNs may be subject to significant fluctuations due to changes in the underlying asset, market conditions, and supply and demand dynamics. In some circumstances, the correlation between the ETC or ETN and its underlying may weaken, and price movements may diverge from the expected relationship.

Liquidity in ETCs and ETNs may vary. Where underlying markets are less liquid or where market participants withdraw, bid/offer spreads may widen and execution may become more uncertain. It may not be possible to execute or close a position at the quoted price or within a reasonable timeframe, particularly during periods of market stress.

ETCs and ETNs are subject to counterparty and issuer risk. If the issuer becomes insolvent or fails to meet its obligations, the value of the ETC or ETN may be significantly impaired or reduced to zero, regardless of the performance of the underlying asset.

If market conditions deteriorate or liquidity becomes insufficient, Saxo may be unable to execute client orders immediately or at all. In such circumstances, orders may be delayed, partially filled, or executed at prices materially different from quoted levels. Saxo shall not be responsible for losses arising from such market conditions.

The maximum loss when trading ETCs and ETNs is generally limited to the amount invested. However, due to the combination of market risk, issuer risk, and the use of leverage in certain products, the full invested amount may be lost.

Transactions in ETCs and ETNs may involve additional costs, including bid/offer spreads, brokerage commissions, and management or structuring fees. These costs may have a material impact on investment returns, particularly in leveraged or frequently traded products.

Therefore, Saxo recommends that clients carefully consider whether trading in ETCs and ETNs is appropriate in light of their experience, financial situation, and risk tolerance.

Turbos

Turbos are leveraged financial instruments that provide exposure to an underlying asset such as equities, indices, commodities, currencies or precious metals. Turbos allow investors to take long or short positions and are typically used for short-term trading or hedging purposes.

Turbos are structured with a financing level provided by the issuer, meaning that the investor only pays a portion of the value of the underlying asset. The remaining exposure is financed by the issuer, creating leverage. As a result, changes in the price of the underlying asset may lead to disproportionately larger changes in the value of the turbo.

A key characteristic of turbos is the presence of a predefined knock-out, termination trigger or barrier level. If the price of the underlying asset reaches this level, the turbo is automatically terminated. In such circumstances, the investment may expire worthless or result in only a limited residual value, depending on the product structure.

As a general rule, Saxo clients must take responsibility for understanding the structure and risks of turbos, including the impact of leverage, financing costs, and the knock-out mechanism. Saxo does not guarantee any specific performance or that positions will remain active until a desired exit point.

The value of turbos is influenced by multiple factors, including the price of the underlying asset, the financing level, interest charges on the financed portion, and market conditions. The financing level is typically adjusted over time to reflect accrued costs, which may adversely affect the value of the investment.

Due to the knock-out feature, turbos are particularly sensitive to short-term price movements. Even temporary market movements may trigger the barrier, resulting in immediate termination of the position and realization of losses, regardless of subsequent price recovery in the underlying asset.

Turbos are subject to issuer risk. As issuer-issued structured products, the value of the turbo depends on the issuer’s ability to meet its obligations. In the event of issuer insolvency or default, the value of the turbo may be significantly impaired or reduced to zero.

Liquidity in turbos may vary depending on market conditions. In periods of reduced liquidity or market stress, bid/offer spreads may widen, and it may not be possible to execute or close a position at the quoted price or within a reasonable timeframe.

If market conditions deteriorate or liquidity becomes insufficient, Saxo may be unable to execute client orders immediately or at all. In such circumstances, orders may be delayed, partially filled, or executed at prices materially different from quoted levels. Saxo shall not be responsible for losses arising from such market conditions.

The maximum loss when trading turbos is generally limited to the amount invested. However, due to leverage and the knock-out mechanism, losses may occur rapidly and without the opportunity to react, and the full invested amount may be lost.

Transactions in turbos may involve additional costs, including bid/offer spreads and financing costs associated with the leveraged exposure. These costs are reflected in the product pricing and may have a material impact on trading outcomes.

Therefore, Saxo recommends that clients carefully consider whether trading in turbos is appropriate in light of their experience, investment objectives, and risk tolerance.

Warrants

Warrants are leveraged financial instruments that provide exposure to an underlying asset, such as equities, indices, commodities, or currencies. Warrants grant the holder the right, but not the obligation, to buy or sell the underlying asset at a predetermined strike price at or before a specified maturity date.

The value of a warrant is derived from multiple factors, including the price of the underlying asset, the strike price, time to maturity, interest rates, and the volatility of the underlying asset. As warrants approach maturity, their time value declines, which may result in a reduction in value even if the underlying asset price remains unchanged.

Warrants provide leveraged exposure, meaning that changes in the price of the underlying asset may result in disproportionately larger changes in the price of the warrant. While this may increase potential returns, it also significantly increases the risk of losses, including rapid loss of value.

Certain warrants may expire worthless at maturity if the underlying asset does not meet the required conditions relative to the strike price. In such cases, the investment may lose its entire value.

As a general rule, Saxo clients must take responsibility for understanding the structure and risks of warrants, including the impact of leverage, time decay, volatility, and the relationship between the warrant price and the underlying asset. Saxo does not guarantee any specific performance or outcome from trading warrants.

The price of warrants may be highly volatile and may not move in direct proportion to the underlying asset. Changes in implied volatility, market conditions, and time to maturity may materially influence pricing independently of movements in the underlying asset.

Warrants are subject to issuer risk. Warrants are typically issued by financial institutions, and the value of the warrant is dependent on the issuer’s ability to meet its obligations. In the event of issuer insolvency or default, the value of the warrant may be significantly impaired or reduced to zero.

Liquidity in warrants may vary. In certain market conditions, particularly where trading activity is limited, bid/offer spreads may widen, and it may be difficult to execute or close a position at the quoted price or within a reasonable timeframe.

If market conditions deteriorate or liquidity becomes insufficient, Saxo may be unable to execute client orders immediately or at all. In such circumstances, orders may be delayed, partially filled, or executed at prices materially different from quoted levels. Saxo shall not be responsible for losses arising from such market conditions.

The maximum loss when trading warrants is generally limited to the amount invested. However, due to leverage and time decay, the value of a warrant may decline rapidly, and the full invested amount may be lost.

Transactions in warrants may involve additional costs, including bid/offer spreads, brokerage commissions, and embedded financing costs reflected in pricing. These costs may have a material impact on trading outcomes.

Therefore, Saxo recommends that clients carefully consider whether trading in warrants is appropriate in light of their experience, investment objectives, and risk tolerance.

Deferred Settlement Service (SRD)

The Deferred Settlement Service (SRD) is a trading service that allows clients to take leveraged positions in eligible securities by deferring settlement and delivery obligations until a specified future date, typically at the end of the trading month. Through SRD, clients may take both long and short positions by providing collateral rather than paying the full value of the transaction upfront.

SRD involves the financing of positions by the financial intermediary. Clients are required to maintain sufficient collateral (coverage) to support their positions, calculated based on the value of cash and securities held in the account and subject to applicable regulatory and operational requirements. The level of available coverage determines the capacity to open and maintain SRD positions and is subject to ongoing fluctuation.

As a general rule, Saxo clients must take responsibility for understanding the structure and risks of SRD trading, including the implications of leverage, deferred settlement, and collateral requirements. Saxo does not guarantee that clients will be able to maintain positions until the settlement date or that additional collateral will not be required.

SRD provides leveraged exposure, meaning that clients may establish positions exceeding the value of their initial investment. As a result, movements in the price of the underlying securities may lead to disproportionately larger gains or losses. Adverse market movements may result in losses exceeding the collateral provided.

SRD also enables short selling, whereby clients sell securities they do not own with the intention of repurchasing them at a later date. Short positions expose clients to the risk of unlimited losses, as the price of the underlying security may increase without limit. Clients are responsible for ensuring that positions can be closed, and settlement obligations met at the end of the settlement period.

The valuation of SRD positions and the calculation of coverage are subject to continuous changes based on market conditions, including price movements of the underlying securities and realized or unrealized gains and losses. A reduction in available coverage may result in the requirement to provide additional collateral or reduced positions.

If a client fails to meet coverage or settlement obligations, Saxo may act on behalf of the client and without prior notice to reduce or close positions to mitigate risk. Such actions may be taken under unfavorable market conditions and may result in realized losses. Saxo shall not be responsible for losses arising from such actions.

Liquidity and execution conditions may vary. In periods of market stress or reduced liquidity, it may not be possible to execute or close positions at the expected price or within a reasonable timeframe. Orders may be delayed, partially executed, or filled at prices materially different from quoted levels.

The potential loss when trading under SRD may exceed the amount of the initial investment due to the use of leverage and the structure of deferred settlement. Clients may incur losses greater than the collateral provided and may be required to fund such losses.

Transactions under SRD may involve additional costs, including deferred settlement commissions (CRD), brokerage fees, financing costs, and charges related to the extension or rollover of positions. These costs may have a material impact on trading outcomes.

Therefore, Saxo recommends that clients carefully consider whether trading under SRD is appropriate in light of their experience, financial situation, and risk tolerance.

Complex shares (OTC equities)

Complex shares are equities that are not admitted to trading on a regulated market or Multilateral Trading Facility (MTF), but instead traded over-the-counter (OTC). Trading in such instruments takes place in less regulated environments where transparency, price formation, and market integrity standards may be materially lower than on regulated exchanges.

Prices in complex shares are typically based on indicative bid and offer quotations rather than continuous central order book trading. As a result, pricing may be less reliable, subject to wider spreads, and more susceptible to sudden changes. Liquidity in these instruments is often limited, and the ability to execute or close a position at or near the quoted price cannot be assured, particularly during periods of market stress.

Market activity in complex shares may be irregular and influenced by limited participation. This may result in heightened volatility, including significant price gaps or abrupt movements unrelated to observable fundamental developments. In addition, the availability, timeliness, and quality of information regarding the underlying issuer may be reduced compared to issuers listed on regulated exchanges.

As a general rule, Saxo clients must take responsibility for understanding the nature and risks of trading complex shares, including the possibility of impaired price discovery, execution uncertainty, and limited access to reliable issuer information. Saxo does not guarantee the availability of liquidity or the ability to execute transactions at expected prices.

If market conditions deteriorate or liquidity becomes insufficient, Saxo may be unable to execute client orders immediately or at all. In such circumstances, client orders may be delayed, partially filled, or executed at prices materially different from quoted levels. Saxo shall not be responsible for losses arising from such market conditions.

The maximum loss when trading complex shares is generally limited to the amount invested. However, clients should be aware that the full invested amount may be lost.

Transactions in complex shares may involve additional costs, including wider spreads, higher commissions, or fees associated with accessing OTC liquidity providers. These costs may have a material impact on trading outcomes.

Therefore, Saxo recommends that clients carefully consider whether trading in complex shares is appropriate in light of their experience, financial situation, and risk tolerance.

Complex ETFs

Complex ETFs are exchange-traded funds that may invest in alternative assets, use leverage, or employ complex strategies such as short exposure or derivative-based replication. These features may materially alter the risk and return profile compared to traditional ETFs that track an underlying index without leverage or structural enhancements.

Complex ETFs may include, but are not limited to, leveraged ETFs, inverse ETFs, commodity ETFs, and ETFs using synthetic replication. The value and return of such instruments are dependent not only on the performance of the underlying assets, but also on the specific strategy employed, including the use of derivatives, leverage, and daily rebalancing mechanisms.

Certain complex ETFs, in particular leveraged and inverse ETFs, are designed to achieve a multiple or inverse of the daily performance of an underlying index. Due to daily resetting and compounding effects, the performance of such ETFs over periods longer than one day may deviate significantly from the expected multiple or inverse of the underlying index. This may result in losses even where the underlying index performs favourably over the holding period.

As a general rule, Saxo clients must take responsibility for understanding the structure and objectives of complex ETFs, including the implications of leverage, inverse exposure, synthetic replication, and compounding effects. Saxo does not guarantee that complex ETFs will achieve their stated investment objectives over any holding period.

The price of complex ETFs may be subject to significant fluctuations due to movements in the underlying assets, changes in market conditions, and variations in supply and demand. Where complex ETFs invest in less liquid assets or use derivatives, price formation may be less transparent, and the ETF may trade at a premium or discount to its net asset value.

Liquidity in complex ETFs may vary. In periods of market stress or dislocation in underlying markets, liquidity may deteriorate, resulting in wider bid/offer spreads and increased execution uncertainty. As a result, it may not be possible to execute or close a position at the quoted price or within a reasonable timeframe.

Certain complex ETFs are exposed to counterparty risk, particularly where synthetic replication or securities lending is employed. Failure of a counterparty to meet its obligations may adversely affect the value of the ETF.

If market conditions deteriorate or liquidity becomes insufficient, Saxo may be unable to execute client orders immediately or at all. In such circumstances, orders may be delayed, partially filled, or executed at prices materially different from quoted levels. Saxo shall not be responsible for losses arising from such market conditions.

The maximum loss when trading complex ETFs is generally limited to the amount invested. However, due to the use of leverage and complex strategies, losses may occur rapidly, and the full invested amount may be lost.

Transactions in complex ETFs may involve additional costs, including ongoing management fees, bid/offer spreads, and brokerage commissions. These costs may have a material impact on investment returns, particularly in products with frequent rebalancing or short holding periods.

Therefore, Saxo recommends that clients carefully consider whether trading in complex ETFs is appropriate in light of their experience, investment objectives, and risk tolerance.

Complex mutual funds

Complex mutual funds are investment funds that may invest in alternative asset classes, use derivatives, employ leverage, or pursue complex investment strategies. These features may materially alter the risk and return profile.

Complex mutual funds may include, but are not limited to, funds investing in illiquid assets, alternative investments, or derivatives, as well as funds employing leverage or inverse strategies. The value and return of such funds depend not only on the performance of the underlying assets, but also on the specific investment strategy, use of financial instruments, and market conditions.

Certain complex mutual funds may use leverage or derivatives to increase exposure to underlying assets. The use of such techniques may amplify both gains and losses and may result in more volatile performance compared to non-complex mutual funds. In addition, funds investing in alternative or illiquid assets may face constraints in valuing or disposing of such holdings.

As a general rule, Saxo clients must take responsibility for understanding the structure, investment strategy, and risks of complex mutual funds, including the implications of leverage, derivatives, and investments in illiquid or alternative assets. Saxo does not guarantee any specific return, liquidity profile, or alignment between the fund’s stated objective and realised performance.

The value of complex mutual funds is typically determined based on the net asset value (NAV), which reflects the value of underlying holdings. The frequency and reliability of NAV calculation may vary depending on the liquidity and valuation methodology of the underlying assets. In certain circumstances, pricing may be subject to estimation or delayed valuation.

Liquidity in complex mutual funds may be limited. Redemption of fund units may be subject to notice periods, dealing frequency restrictions, or suspension in stressed market conditions. As a result, clients may not be able to redeem their investment at short notice or at expected values.

The performance of complex mutual funds may be adversely affected by market conditions, changes in interest rates, credit quality of underlying assets, currency movements, and other risk factors associated with the underlying strategy. Where derivatives or alternative investments are used, additional risks such as counterparty risk, valuation risk, and increased volatility may arise.

Mutual fund transactions are executed with the fund issuer in the market, and Saxo does not provide liquidity or internalize orders. If market conditions deteriorate or underlying assets become illiquid, the fund provider may delay, reprice, or suspend transactions in accordance with the fund’s rules. This may result in delays or execution at values different from expected prices.

The maximum loss when investing in complex mutual funds is generally limited to the amount invested. However, due to the nature of the underlying assets and investment strategies, the full invested amount may be lost.

Investments in complex mutual funds may involve additional costs, including ongoing management fees, administrative expenses, and performance-related charges. These costs are reflected in the fund’s net asset value and may have a material impact on overall returns.

Therefore, Saxo recommends that clients carefully consider whether investing in complex mutual funds is appropriate in light of their experience, investment objectives, and risk tolerance.

Complex bonds

Complex bonds are debt instruments that contain additional features which may affect their structure, cash flows, and risk profile. Such features may include, but are not limited to, variable interest payments, embedded options, subordination, conversion rights, or linkage to external factors such as inflation, interest rates, or other underlying assets.

The characteristics of complex bonds may result in outcomes that differ materially from traditional fixed-rate bonds. The timing and amount of interest payments, as well as the return of principal, may vary depending on the specific terms of the instrument, issuer actions, or prevailing market conditions.

Certain complex bonds may be redeemable at the discretion of the issuer prior to maturity (callable bonds), converted into equity (convertible bonds), or written down or converted under predefined conditions (e.g. contingent convertible bonds). In such cases, investors may not receive the expected return and may be required to reinvest proceeds under less favourable conditions or may incur partial or full loss of capital.

As a general rule, Saxo clients must take responsibility for understanding the specific features and risks associated with complex bonds, including the impact of embedded options, issuer discretion, and market conditions on expected returns and cash flows. Saxo does not guarantee any specific return, yield, or holding period for such instruments.

Prices of complex bonds are sensitive to changes in interest rates, credit quality of the issuer, and overall market conditions. Increases in interest rates will generally result in declines in bond prices, particularly for bonds with longer duration or fixed coupons. Deterioration in the issuer’s creditworthiness may result in a significant reduction in the bond’s value or, in the event of default, loss of interest and/or principal.

Liquidity in complex bonds may be limited. Trading may take place in less liquid markets where the number of buyers and sellers is restricted. As a result, bid/offer spreads may be wide, and it may not be possible to execute or close a position at the quoted price or within a reasonable timeframe, particularly during periods of market stress.

If market conditions deteriorate or liquidity becomes insufficient, Saxo may be unable to execute client orders immediately or at all. In such circumstances, orders may be delayed, partially filled, or executed at prices materially different from quoted levels. Saxo shall not be responsible for losses arising from such market conditions.

The maximum loss when trading complex bonds is generally limited to the amount invested. However, clients should be aware that the full invested amount may be lost in the event of issuer default or if the bond is subject to loss-absorption mechanisms.

Transactions in complex bonds may involve additional costs, including commissions, bid/offer spreads, and costs related to accessing liquidity. These costs may have a material impact on investment returns, particularly for shorter holding periods.

Therefore, Saxo recommends that clients carefully consider whether trading in complex bonds is appropriate in light of their experience, financial situation, and risk tolerance.

Investment trusts

Investment trusts are collective investment vehicles, typically structured as closed-end funds with a fixed number of shares traded on an exchange. The value of an investment trust is determined by both the value of its underlying assets and market supply and demand for its shares. As a result, investment trusts may trade at a premium or discount to their net asset value (NAV).

Investment trusts may invest in a range of asset classes, including equities, bonds, alternative investments, and derivatives. Certain investment trusts may also employ leverage or complex investment strategies, which may materially affect their risk and return profile.

The market price of an investment trust is influenced not only by the performance of its underlying assets, but also by investor demand. This may result in sustained or widening discounts or premiums to NAV, meaning the value realized upon sale may differ materially from the underlying asset value.

Certain investment trusts may use leverage to increase exposure to underlying assets. The use of leverage may amplify both gains and losses and may result in greater volatility compared to non-leveraged investments. In addition, investment trusts may employ specialized strategies, including long/short approaches, which may introduce additional risks related to market positioning and execution.

As a general rule, Saxo clients must take responsibility for understanding the structure and risks of investment trusts, including the implications of leverage, market pricing dynamics, and the potential divergence between market price and NAV. Saxo does not guarantee any specific return, liquidity, or alignment between market price and the value of underlying assets.

Liquidity in investment trusts may vary depending on market conditions and trading volumes. In certain circumstances, particularly in markets with limited participation, bid/offer spreads may widen and it may be difficult to execute or close a position at the quoted price or within a reasonable timeframe.

The valuation of investment trusts is based on the net asset value of underlying holdings; however, the traded price is determined by market conditions and may not reflect the NAV at any given time. Pricing of underlying assets, particularly where alternative or less liquid investments are held, may also be subject to estimation or delay.

If market conditions deteriorate or liquidity becomes insufficient, Saxo may be unable to execute client orders immediately or at all. In such circumstances, orders may be delayed, partially filled, or executed at prices materially different from quoted levels. Saxo shall not be responsible for losses arising from such market conditions.

The maximum loss when trading investment trusts is generally limited to the amount invested. However, due to market volatility, leverage, and pricing dynamics, the full invested amount may be lost.

Transactions in investment trusts may involve additional costs, including brokerage commissions, bid/offer spreads, and management or administrative fees reflected in the trust structure. These costs may have a material impact on investment returns.

Therefore, Saxo recommends that clients carefully consider whether investing in investment trusts is appropriate in light of their experience, investment objectives, and risk tolerance.

Further information about risks is available in Saxo’s General business terms.