What Is a Turbo?
A turbo is a leveraged certificate issued by a bank that lets you take a geared bet on a stock, index or commodity for a fraction of its price. It is one of Europe’s most popular retail leverage products — but its defining feature, the knock-out, makes it behave nothing like an option. Understanding the financing level and that barrier is the difference between using a turbo and being wiped out by one.
Open the Long Call calculator →The financing level and how leverage is built
A turbo long lets you control the full value of the underlying while only funding part of it — the issuer finances the rest, up to the financing level. You pay for the gap between the price and that level, so a turbo on a €50 stock with a €40 financing level costs about €10 (per the ratio). That smaller outlay is where the leverage comes from.
Leverage is simply the price divided by your outlay: €50 ÷ €10 = 5×. A 2% move in the stock then moves the turbo about 10%. A turbo short flips it — the financing level sits above the price and you profit when the underlying falls. The closer the financing level is to the price, the higher the leverage, and the closer the knock-out.
The knock-out barrier — the defining risk
Every turbo has a knock-out (or stop-loss) level near its financing level. If the underlying ever touches it, the turbo ends immediately — usually returning little or nothing. This is the one feature that separates a turbo from an option: there is no recovering from a knock-out, even if the stock rebounds a minute later.
That makes a turbo unforgiving in exactly the way an option is forgiving. A long option that moves against you merely loses value and survives; a turbo that touches its barrier is dead. Higher leverage means a closer barrier, so the cheap, high-leverage turbos are the ones most likely to knock out.
Cost: financing, not time decay
A turbo has no option-style time value, so it does not suffer theta decay or move with implied volatility. Instead you pay a financing cost: the financing level creeps up a little each day for a long (down for a short), quietly eroding value the longer you hold. Most turbos are open-ended, with no expiry — only the barrier and the financing drag.
So a turbo tracks the underlying almost linearly (geared by the leverage), minus a slow financing bleed, until it either is sold or knocks out. That linear, no-Greeks behaviour is simpler than an option in good times and brutal at the barrier.
- A turbo finances part of the position; your outlay is the gap to the financing level, and that gap creates the leverage.
- Leverage = price ÷ outlay; a closer financing level means more leverage and a closer knock-out.
- The knock-out is the defining risk: touch the barrier and the turbo ends, usually near worthless, with no recovery.
- No time decay or IV; instead a daily financing cost — turbos are open-ended but bleed the longer you hold.
Frequently asked questions
What is a turbo in simple terms?
A turbo is a bank-issued leveraged certificate. You fund only the gap between the underlying’s price and a financing level, which gives geared exposure. It tracks the underlying almost linearly but ends instantly if the price hits its knock-out barrier.
What happens when a turbo knocks out?
It terminates immediately and pays out little or nothing (sometimes a small residual above the financing level). Unlike an option, there is no recovery if the underlying rebounds afterwards — the position is closed for good.
Is a turbo the same as an option?
No. A turbo has near-linear, leverage-geared payoff with no time value or implied-volatility sensitivity, but a knock-out barrier that can cause total loss. A long option has time decay and IV sensitivity, but its loss is capped at the premium and it cannot be knocked out.
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