Turbos on DEGIRO: get warned before your knock-out level is hit

A turbo is terminated automatically as soon as the underlying hits its stop-loss (knock-out) level; with a BEST turbo you then get nothing back. An advance warning works best on the underlying itself: set a price alert a few percent above the stop-loss level of your turbo long (or below it for a short), so you still have time to adjust.

How a knock-out works

A turbo is a leveraged product. The issuing bank finances most of your position; that part is called the financing level. Above it (for a long) sits the stop-loss level. When the underlying hits that level, the issuer terminates the turbo. In Germany and Austria these products are called knock-out certificates; the principle is the same.

What you get back depends on the type:

• Classic turbo: the stop-loss level is above the financing level. After a knock-out you receive a residual value, set by the issuer, which can be lower than you expect.
• BEST turbo: the stop-loss level equals the financing level. After a knock-out there is no residual value (AFM, February 2020).

The financing level also shifts every day because of financing costs. With a turbo long, your knock-out level slowly creeps up, even if the price does nothing. The current level is in the issuer’s product information.

What the numbers say

The Dutch regulator AFM analysed turbo trading by Dutch private investors between June 2017 and June 2018. Some findings from that report (AFM, February 2020):

• 68% of investors made a loss, on average €2,680 per investor;
• the higher the leverage, the larger the loss;
• the average turbo was held for 6 days, and 56% of positions were closed within 24 hours.

With leverage of 10, a 5% drop in the underlying means roughly a 50% loss on your turbo. That happens faster than you can check the price.

Why DEGIRO doesn’t warn you

DEGIRO has no price alerts. You can put a stop loss order on your turbo, but it becomes a market order once your level is hit, and DEGIRO states that a stop loss is not released when there are no visible market maker quotes (DEGIRO, Orders and Order Execution Policy). Which order types are available for a turbo differs per product; you see them in the order screen.

The trade-off between an order and an alert is covered in Stop loss or price alert on DEGIRO?. For turbos the advice is: use both. How to set up the alert part is explained in DEGIRO price alerts.

Put the alert on the underlying

The knock-out is decided by the price of the underlying, not the price of the turbo. That makes an alert on the turbo price itself hard to pick. This works better:

1. Look up your turbo’s stop-loss level, for example €182 for a turbo long on a share now trading at €200.
2. Add the underlying as a position you follow.
3. Set an alert a few percent above the knock-out level, for example “Price below” €188. That leaves room to act: sell, reduce or roll over into a turbo with a lower level.
4. Adjust the level now and then, because the financing level shifts.

This is easiest for turbos on shares. An index or commodity can’t be added as a position; there you use alerts on the turbo itself.

You can also set an alert on the turbo itself, for example “Return vs. avg. cost price” at −30% or “Trailing from peak” at 25%. That tells you how the position stands in euros.

How it works in ClearAnalyser

The Scenario Alerts tab of ClearAnalyser supports turbos and other leveraged products. Free price sources such as Yahoo Finance don’t quote turbos, so ClearAnalyser takes a turbo’s price from DEGIRO’s own price feed. The price chart and monitoring work just as they do for a share.

• Free: up to three levels per position and a Chrome notification. The price is checked every 1, 5 or 15 minutes; for turbos on weekdays from 07:30 to 22:30 (CET), because turbos trade longer than many stock exchanges.
• With Premium: an email through your own Gmail, an early warning when the price approaches your level, monitoring while your computer is off and a stop loss or limit order already filled in at DEGIRO. You place it yourself.

Be honest about what an alert can do. With an opening gap or a crash within a minute, the turbo may already be gone before the next check. An alert is an extra chance to step in on time, not a guarantee.

Frequently asked questions

What happens when my turbo hits the knock-out?

The issuer terminates the turbo. With a classic turbo you get a residual value set by the issuer; with a BEST turbo that residual value is zero. Any residual value is credited to your DEGIRO account.

Can I set an alert on the knock-out level at DEGIRO?

Not in DEGIRO itself, because DEGIRO has no price alerts. With ClearAnalyser you set an alert on the underlying, just above the knock-out level, and on the turbo itself. Most portfolio trackers have no price alerts at all; see the DEGIRO portfolio tracker comparison.

Does the knock-out level move?

Yes. The financing level changes daily because of financing costs, and with many turbos the stop-loss level moves along with it. Check the current level with the issuer and adjust your alert if needed.

How much should I put into a turbo?

Work with the amount you can afford to lose: with a BEST turbo that is your entire stake. How to size a position to the loss you are willing to bear is explained in Risk/reward and position size.

Sources: AFM (February 2020): Quantitative analysis of turbos distributed to retail clients in the Netherlands (pdf) · DEGIRO: Orders and Order Execution Policy (pdf) · BrokerChooser: DEGIRO price alerts explained