A bonus certificate template is used to design a professional certificate; they can be used for many reasons. A bonus certificate means the receiver will get extra amount apart from the amount or benefits mentioned on a certificate. It is given at the current price of the underlying or we may say that at bar value. The receiver of this certificate gets the upper level value when the issuing authority adds the bonus amount due to any reason. Similarly, the same bar value can also be reduced by issuing authority, which will reduce the current bar value to a lower level. The reasons for adding bonus value in certificates largely depend on the marketing strategies of the issuing authority or organization.
What Makes a Bonus Certificate Different?
A company can get many advantages by issuing a bonus certificate, either for a product or a specific amount on a product or service. An investor gains from the rising prices of a product and receives a bonus payment. On the other hand, when the price of the same product or service is falling, it is protected down to a safety barrier. And if there is a case of slump, then the bonus payment is not paid anymore, and the price of the underlying assets is credited at the end of maturity date. However, even though we have many advantages of a bonus certificate but there are two main disadvantages of a bonus certificate. The first one is that we do not get a dividend from bonus certificates like a share certificate where shareholders get a dividend on a yearly basis. The second disadvantage is that we only get the amount of bonus certificate at the time of maturity and can not get it before that.
The Best Time for Investment and Key Points?
We should invest in a bonus certificate when skew is high or is expected to fall, when volatility is high or is expected to fall. It is also good to invest in a bonus certificate when the dividend yield of any underlying stock is high or is expected to fall in the future. Make sure that you get better contingent protection over a high bonus and a shorter maturity time over a higher bonus level.
When Should We Not Invest in a Bonus Certificate?
You should not invest in a bonus certificate when the time remaining for maturity is more than three years. Do not raise your bonus level too high that it reaches the detriment of the barrier, because in this case when the barrier is split, your bonus will go with it too. It is also to keep in mind that you should not use your bonus certificate for in and out trades, that’s frequent.
Benefits of Bonus Certificate
1. With the help of a bonus certificate you have the benefit of getting the alternative return even if there is no change in the price of underlying or it has fallen low as long as the prices hasn’t fallen enough to be below the barrier. This shows that bonus certificates also help you in bringing a little more safety to your portfolio.
2. With the help of a bonus certificate you also get a whole profit from the rising prices for the underlying.
3. You also get to choose how much risk you want to take by choosing the barrier levels of your choice.
The main thing to keep in mind is that if the underlying falls above or below the barrier even once during the time of the certificate and before the maturity, you will not receive any bonus.
