On-chain analyst Ai Yi said in a post on X that the narrative behind the South Korea Hynix 2x long product is breaking down in a highly volatile market. According to the post, the product has fallen nearly 75% from its June peak, and its market value has shrunk by more than HK$80 billion in just one month. Ai Yi also said South Korean regulators have stepped in and stressed “deleveraging.”
To illustrate the mechanics, Ai Yi used a simplified example in which both SK Hynix shares and the ETF start at 1. If the stock swings up and down by 10% each day for 20 sessions, the stock would end at 0.9984, almost back where it started. The ETF’s net asset value, however, would fall to 0.7978, implying a loss of more than 20% even without a major directional decline.
The post said this reflects the “volatility decay” built into 2x and 3x leveraged ETFs, which must rebalance positions after each trading day to maintain a daily return target. Ai Yi added that the South Korea Hynix 2x long product has now dropped back to its April 30 price level, when SK Hynix traded at KRW 1.3 million, while the stock’s current price remains at KRW 1.65 million after several rounds of declines.
Odaily reported that on-chain analyst Ai Yi said in a post on X that the narrative behind the South Korea Hynix 2x long product is unraveling under extreme market volatility. The product has fallen nearly 75% from its June peak, and more than HK$80 billion in market value has been erased in one month.
Ai Yi also said South Korean regulators have stepped in and emphasized “deleveraging.”
How volatility decay works
Ai Yi used a simple example in which both SK Hynix shares and the ETF start at 1. In a scenario where the stock does not suffer a major decline but instead swings for 20 trading days with daily moves of plus or minus 10%, the stock would end at 0.9984 after 20 days, essentially back at its starting point. The net asset value of the South Korea Hynix 2x long ETF, by contrast, would fall to just 0.7978, a loss of more than 20%.
According to the post, 2x and 3x leveraged ETFs carry “volatility decay.” To keep their target of delivering twice the single-day return, these products need to rebalance positions after each trading session, buying more after gains and selling more after losses.
Back to the April 30 price level
Ai Yi said the South Korea Hynix 2x long product has now dropped to its April 30 price level. At that time, SK Hynix shares were priced at KRW 1.3 million. After several rounds of declines, the current stock price is still KRW 1.65 million.
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