SK Hynix leveraged ETFs leave high-level buyers trapped with losses: average loss exceeds 76%, breaking even would require a gain of over 300%

Odaily News Despite the recent rebound in SK Hynix and Samsung Electronics stock prices, investors who bought near the late-June peak still face substantial losses. Data from the Korea Exchange shows that for investors who bought at the June 25 high, SK Hynix's 7 leveraged ETFs have fallen between -75.98% and -76.75%, with an average loss of 76.51%. Samsung Electronics' 7 single-stock leveraged ETFs have posted cumulative returns of -51.64% to -52.76% from that day, with an average loss of 52.25%. If investors had put 1 million Korean won into each, SK Hynix leveraged ETFs would now be worth only about 235,000 won, while Samsung Electronics leveraged ETFs would have dwindled to roughly 478,000 won.

Due to the non-linear return characteristics of leveraged ETFs, recovering from losses is far more difficult than the drawdown percentage suggests. Data indicates that Samsung Electronics leveraged ETFs would need to rise approximately 109.4% to recover the principal, while SK Hynix leveraged ETFs would need to surge about 325.7%. In other words, a 50% loss requires a 100% gain to break even, while a 75% loss requires a 300% gain.

Analysts point out that single-stock leveraged ETFs typically track twice the daily return of the underlying asset, rather than simply mirroring the stock's price appreciation. Because the leverage ratio is recalculated daily, sustained volatility generates "volatility drag," meaning that even if the underlying stock price returns to previous levels, ETF investors may not fully recover their principal. (Daum)