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Leveraged & Inverse

Double your exposure in the Market with SAMSUNG Daily (2x) Leveraged Product.
Find a powerful tool in a down market with the SAMSUNG Daily (-1x) Inverse Product

1)  Leveraged & Inverse Product vs Derivative

  Leveraged & Inverse Product Warrants / CBBCs Margin Trading Futures Options
Accessibility Cash or Margin Account Cash or Margin Account Margin Trading Account Futures Account Options Account
Possible Loss Limited Limited Infinite Infinite Infinite
Margin Call No No Yes Yes Yes
Leveraged Factor 2x or -1x 2x to 50x or above 2x to 8x Around 15x 2x to 50x or above
Transparency More Less More More Less

2) What is Daily Rebalancing?

 

Leveraged product: At or around the close of the underlying TOPIX Futures/KRX KOSPI Futures market on each trading day in Tokyo/Korea, the Product will seek to rebalance its portfolio, by increasing exposure in response to the Index’s daily gains or reducing exposure in response to the Index’s daily losses, so that its daily leverage exposure ratio to the Index is consistent with the Product’s investment objectives.

 

The table below illustrates how the Product as a leveraged product will rebalance its position following the movement of the Index by the end of the day.* Assuming that the initial Net Asset Value of the Product is 100 on day 0, the Product will need to have a futures exposure of 200 to meet the objective of the Product. If the Index increases by 10% during the day, the Net Asset Value of the Product would have increased to 120, making the futures exposure of the Product 220. As the Product needs a futures exposure of 240, which is 2x the Product‟s Net Asset Value at closing, the Product will need to rebalance its position by an additional 20. Day 1 illustrates the rebalancing requirements if the Index falls by 5% on the subsequent day.

 

  Calculation Day 0 Day 1 Day 2
(a) Initial Product NAV   100 120 108
(b) Initial futures exposure (b) = (a) × 2 200 240 216
(c) Daily Index change (%)   10% -5% -5%
(d) Profit / loss on futures d) = (b) × (c) 20 -12 10.8
(e) Closing Product NAV (e) = (a) + (d) 120 108 118.8
(f) Futures exposure (f) = (b) × (1+(c)) 220 228 226.8
(g) Target futures exposure (g) = (e) × 2 240 216 237.6
(h) Required rebalancing amounts (h) = (g) - (f) 20 -12 10.8

 

*The above figures are calculated before fees and expenses.

 

Inverse product: At or around the close of the underlying TOPIX Futures/KRX KOSPI Futures market on each trading day in Tokyo/Korea, the Product will seek to rebalance its portfolio, by decreasing exposure in response to the Index’s daily gains or increasing exposure in response to the Index’s daily losses, so that its inverse exposure ratio to the Index is consistent with the Product’s investment objectives.

 

The table below illustrates how the Product as an inverse product will rebalance its position following the movement of the Index by the end of the day.* Assuming that the initial Net Asset Value of the Product is 100 on day 0, the Product will need to have a futures exposure of -100 to meet the objective of the Product. If the Index decreases by 10% during the day, the Net Asset Value of the Product would have increased to 110, making the futures exposure of the Product -90. As the Product needs a futures exposure of -110, which is -1x the Product‟s Net Asset Value at closing, the Product will need to rebalance its position by an additional -20. Day 1 illustrates the rebalancing requirements if the Index increases by 5% on the subsequent day.

 

  Calculation Day 0 Day 1 Day 2
(i) Initial Product NAV   100 110 104.5
(j) Initial futures exposure (b) = (a) × -1 -100 -110 -104.5
(k) Daily Index change (%)   -10% 5% -5%
(l) Profit / loss on futures (d) = (b) × (c) 10 -5.5 5.225
(m) Closing Product NAV (e) = (a) + (d) 110 104.5 109.725
(n) Futures exposure (f) = (b) × (1+(c)) -90 -115.5 -99.275
(o) Target futures exposure (g) = (e) × -1 -110 -104.5 -109.73
(p) Required rebalancing amounts (h) = (g) - (f) -20 11 -10.45

 

*The above figures are calculated before fees and expenses.

 

3) Compounding effect

 

Investment returns for periods longer than one day are affected by compounding. Daily compounding can have either a positive or negative effect on returns and daily compounded returns may not be equal to an unleveraged return (or the benchmark index) multiplied by the leveraged factor. The compounding effect increases with:

  • Higher volatility
  • Greater leverage, and
  • Longer holding periods