For the first time, the open interest in single-stock futures has surpassed that of index futures. As investors pile into specific names such as Samsung Electronics and SK hynix, analysts say the center of gravity in Korea's derivatives market is shifting from indexes to individual stocks. The market expects this trend to strengthen further on the back of single-stock leveraged exchange-traded funds (ETFs) and the expansion of weekly options on single stocks.
According to the Korea Exchange (KRX) on the 18th, as of the 15th, the open interest in single-stock futures, combining near-month and far-month contracts, totaled 60.01 trillion won. At the same time, the open interest in index futures—combining KOSPI 200 futures, KOSPI 200 mini futures, and KOSDAQ 150 futures—was 59.83 trillion won. This is the first time since related statistics have been compiled that single-stock futures have surpassed index futures.
As recently as a year ago, index futures dominated Korea's derivatives market. In Jun. 2024, open interest in index futures stood at 2.987 trillion won, 3.5 times the 858 billion won in single-stock futures. As of Jun. last year, index futures (2.8 trillion won) also far outpaced single-stock futures (818 billion won).
This year, however, the size of single-stock futures has swelled to 60 trillion won, surpassing index futures for the first time.
Behind the reversal between index and single-stock futures is a severe tilt toward large-cap semiconductor stocks. For the July contracts, SK hynix had the largest open interest at 32.2 trillion won, followed by Samsung Electronics at 17.33 trillion won. Combined, the two totaled 49.53 trillion won, accounting for 78.2% of the total open interest across all 273 July single-stock futures.
The concentration grew more pronounced among the top names. The top 20 stocks by open interest accounted for 88.44%, and widening the scope to the top 30 pushed the share above 90%. In effect, most of the single-stock futures market is clustered in a handful of large caps.
The concern is that the expansion of single-stock futures could fuel greater volatility. Open interest refers to the size of futures positions that have not yet been closed. When open interest is concentrated in specific names, a sharp share-price drop can trigger margin shortfalls, forced liquidations, and cascading futures position unwinds, amplifying volatility.
A derivatives analyst at a securities firm said, "In the past, investors often bet on the direction of indexes such as the KOSPI 200, but recently demand has surged for trades centered on specific names like Samsung Electronics and SK hynix," adding, "As single-stock futures grow, the likelihood that volatility in particular names spills over into broader market volatility can also rise."
A key driver of the surge in single-stock futures trading is single-stock leveraged ETFs launched last month that track Samsung Electronics and SK hynix as underlying assets. To deliver twice the return of the underlying, single-stock leveraged ETFs use instruments such as stock futures; as inflows increase, liquidity providers' (LPs) hedging needs rise in tandem.
In fact, from May 20 to 27, over one week, open interest in SK hynix stock futures jumped from about 21 trillion won to 34 trillion won, while Samsung Electronics rose from 13 trillion won to 16 trillion won over the same period.
In addition, the Korea Exchange (KRX) is pushing to introduce weekly options on Samsung Electronics, SK hynix, Hyundai Motor, and LG Energy Solution, a move expected to further invigorate derivatives trading centered on individual names. With one-week maturities, weekly options are considered representative derivatives that attract short-term trading demand.
Some, however, say the expansion of the single-stock futures market should not be read solely as a warning sign. With demand growing for semiconductor and artificial intelligence (AI) names, investors are actively using vehicles to invest in or hedge exposure to specific companies and industries rather than indexes.
Kim Ji-hyun, an analyst at Daol Investment & Securities, said, "The expansion of the single-stock futures market reflects demand from investors seeking to increase exposure to specific industries such as semiconductors and the AI supply chain," adding, "Similar trends are emerging in overseas markets including the United States, so it should be seen as part of the market's growth process."