With the KOSPI showing extreme volatility, swinging by hundreds of points in a single day recently, transactions of leveraged products that bet on gains and inverse products that invest in declines are surging simultaneously in the exchange-traded fund (ETF) market. As a market in which it is hard to predict the direction persists, short-term trading demand is converging on both-sided products at the same time.
According to the Korea Exchange (KRX) on the 12th, since the start of this month, leveraged and inverse products have ranked side by side among the top in ETF trading volume. In addition to inverse ETFs that invest in a decline of the KOSPI 200, single-stock leveraged ETFs with Samsung Electronics and SK hynix as underlying assets also saw a sharp increase in transactions.
This is interpreted as the impact of the recent stock market repeatedly surging and plunging intraday. Since the start of this month, the KOSPI has continued a trend of intraday swings of hundreds of points. On some trading days, the intraday range exceeded 700 points.
In the market, given that volatility itself has grown more than directionality, it is seen that short-term trades aiming for price differences have increased simultaneously rather than betting only on gains or declines. In fact, during the bull market in the first half of this year, inverse ETFs led the upper ranks in trading volume, but recently, even single-stock leveraged products have entered the upper ranks, changing the pattern.
In particular, as trading in single-stock leveraged ETFs listed at the end of May has increased rapidly, concerns are being raised that it could amplify market volatility. Leveraged ETFs conduct rebalancing before the market close, buying or selling additional amounts of the underlying assets to meet target returns, and because they have a so-called "short gamma" structure—buying more when prices rise and selling more when they fall—they can expand volatility.
Financial authorities are also reviewing the impact of single-stock leveraged products on the market. In the market, if high volatility continues to the extent that circuit breakers and sidecars are repeatedly triggered for the time being, it is seen as highly likely that short-term trading centered on inverse and leveraged ETFs will also persist for the time being.