A Maximiser participates in the rise of the underlying at more than 100 percent, usually to a cap. In a moderate rally, geared participation can beat a direct holding up to that ceiling.
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The Maximiser and airbag mechanics
Maximisers gear the upside and add an airbag on the downside. Understand both halves, especially the cliff the airbag hides.
Finwisor Research·6min read
Geared upside
The airbag, and its cliff
The airbag returns your principal as long as the underlying does not fall beyond a set depth. Within that cushion, a fall leaves you whole.
The risk is the cliff. If the underlying falls past the airbag, protection switches off and you can take the full loss measured from the start level, not just from the airbag. The comfort is conditional.
Inside the airbag you are whole; past it, you can take the full loss.
Reading a Maximiser
Check the participation, the cap and the airbag depth together. A deep airbag with a low cap is a very different instrument from a shallow airbag with a high cap.
This article is educational and does not constitute investment, tax or legal advice, nor a solicitation to invest. Any figures are indicative illustrations of mechanics, not forecasts. Refer to official term sheets and consult a qualified professional before investing.