From Bloomberg, June 8/9:
A leveraged exchange-traded fund tracking SK Hynix Inc. deviated sharply from the underlying stock’s move for a second day, underscoring the risk of investing in such products that have attracted strong retail interest.
The KIM ACE SK Hynix Single Stock Leverage ETF, designed to deliver twice the chipmaker’s daily return, plunged 27% on Tuesday even as SK Hynix jumped 16%. The divergence followed Monday’s dislocation, when the ETF soared 50% despite the stock falling nearly 8%.
The back-to-back wrong-way moves have intensified scrutiny of the ETF manager Korea Investment Management Co., which said yesterday’s anomaly for the $37 million product stemmed from a lack of liquidity. On Tuesday, the Korea Exchange KRX Flags 3 Leveraged SK Hynix ETFs for Possible Caution Status three funds, including KIM ACE, as potential candidates for an investment warning due to a divergence in their net asset value and market prices.
“Such dislocations are rare but not unprecedented,” said Jung In Yun, chief executive officer at Fibonacci Asset Management. “ETFs typically rely on market makers to keep prices aligned with underlying holdings. However, during the closing auction, those safeguards can weaken, particularly in niche products with limited trading volume.”....
....MUCH MORE
As noted introducing 2021's What The Heck Is "Spatial Finance":When losing money it is often a good idea to figure-out why you lost money.
And if you can do so prior to the losses, you can immediately move on to new and hitherto undreamt-of ways to lose money....
