DLCs are called "Daily" Leverage Certificates because the leverages they provide are fixed and presented on a daily basis.
The fixed daily leverage factor can vary across products depending on the individual product terms. Some of the more common leverage factors are 3, 5 and 7x.
Taking a 5x Long DLC as an example, for every 1% the Underlying Asset goes up from its previous close, DLC theoretical values goes up by 5% from its previous closing theoretical value. If the Underlying Asset goes up by 2%, DLC would be up by 10% instead, and so forth.
If, on the other hand, the Underlying Asset goes down, Long DLC would also decrease in value with a leverage.
Daily Percentage Performance*
Daily Percentage Performance
*Before costs & fees are applied.
Please note that investors should NOT refer to the last traded price in the previous trading day as the reference price to determine DLC daily performance. This is because last trade done in the previous day may not be transacted exactly at market close of the Underlying Asset. DLC value, as well as the market making quotes, continues to move with the Underlying Asset after the last trade is done. In other words, last traded price in the previous day does not reflect the true DLC value at market close.
Investors should refer to Intrinsic Close published on UBS's DLC website as reference price to determine DLC daily percentage performance.
Intrinsic Close is the value computed with reference to the valuation formula of the Certificates. More information on the valuation formula of the Certificates can be found in the relevant supplemental listing documents.