Hotcoin Leveraged ETF Product Elements (Summary)
HotcoinProduct introduction
A fixed target multiple of the fixed asset ETF's anchored asset return. For example, the daily return on a 3x leveraged long BTC is 3 times the daily return on the underlying asset of the BTC / USDT. Among them, the daily rate of return is defined as the rate of return for a time period between UTC + 8 00:00:00 and the next day UTC + 8 00:00:00. Fixed leverage ETFs are perpetual products. There is no expiration date, and the price will not be completely zero, so there is no risk of liquidation. Investors can buy or sell tokens on the secondary market at any time. The fixed leverage ETF is denominated in USDT, and the trading mechanism is similar to currency trading.
A fixed-lever ETF is essentially a unit share of a fixed-lever fund. The fund manager ensures that the fund returns a fixed target multiple of the anchored asset return. Investors can obtain a specified multiple of the target asset by trading a fixed-lever ETF. Gains. When the target asset's volatility in the opposite direction exceeds a set threshold, the fund manager will readjust the fund position by introducing a fuse mechanism to ensure that the fund's net value and token value loss will not exceed a certain limit. In short, through the risk management measures of the fund manager, the token investor can be relieved of the fear of liquidation and obtain a certain leverage of the return on the underlying asset.
2. Fund net value and fair price
The essence of a fixed-leverage ETF is to ensure that holders enjoy a fixed target multiple of the daily return on the underlying asset through the income of the fixed-leverage fund. This fixed leverage fund is managed by the platform or a fund manager recognized by the platform. The platform announces the fund's net value in real time to maintain a high degree of transparency. In theory, the fund's net worth is the fair transaction price of the tokens in the secondary market. However, due to fluctuations in market sentiment, there may be a slight deviation in the transaction price of the secondary market from the net value at a certain period of time, which will cause a certain premium. At this time, users should pay attention to the risks caused by the price deviation from the net value.
Calculation of fund net worth
Take one day as a time period (UTC + 8 00:00:00 to the next day UTC + 8 00:00:00), the end of the k-th period is recorded as tk, k = 0,1,2, ..., where t0 = 0. Let the initial net value of the unit fund be 100USDT, that is, S (0) = 100 USDT.
S (0): initial value of the fund;
S (t): net value of the fund at time t, t ≥ 0;
P (0): price of the underlying asset at the initial moment;
P (t): underlying asset at t Price at the moment;
M: Target leverage multiple, which can be 2, 3, -1, -2, -3.
The return rate of the fund and the underlying asset in the k-th period are：
The goal of a fixed-leverage fund is to make its return on each time period M times the return on the underlying asset, that is,
Rs (k) = M × Rp (k), k = 1, 2, ...
The net value of the fund at time v in the k-th period is calculated by the following formula:
Investors can purchase a certain amount of tokens through the secondary market at any time to hold a corresponding share of the fund. However, if an investor purchases a certain number of tokens at a certain point v in the k-th period (between tk-1 and tk), the return rate of the tokens held until tk does not equal the corresponding underlying asset in the same M times the return on the period. Only when the investor buys tokens at time tk-1 can the current rate of return be M times the corresponding rate of return on the underlying asset.
3. Timed rebalance
A fixed-leverage fund is essentially an actively managed fund, with its return rate in each cycle anchored to M times the return on the underlying asset. As the price of the underlying asset changes, fund positions at the beginning of each cycle must be adjusted to ensure that this goal can be achieved. Position adjustment mainly adjusts positions based on the fund's net value at the beginning of each cycle, so that the risk exposure of this cycle is anchored to M times the risk exposure of the underlying asset. If the net value at the beginning of the current period is S (tk), the open position set at the beginning of the period is the equivalent USDT position of M × S (tk).
4. Irregular rebalance mechanism
In order to protect the interests of investors and prevent the fund's net value and token price from falling sharply, the fund has established an irregular rebalancing mechanism. When the fluctuation of the target asset in the opposite direction within a day is greater than or equal to a certain threshold, the irregular rebalancing mechanism will be triggered. After the irregular rebalancing mechanism is triggered, the fund manager will intervene to adjust the position. The adjusted risk exposure is M times the fund's net value at the time of the fuse. This process will appropriately reduce the fund position. In other words, the position adjustment mechanism after irregular rebalancing will readjust the leverage to M times according to the fund's net value at that time. The role of this mechanism is to ensure that the fund's net value and token value will not return to zero, and investors who choose the wrong direction can control the losses in a certain range.
5. Rate
The transaction fee for trading leveraged ETF products at Hotcoin is 0.2%. At the same time, we will charge a management fee of 0.1% per leverage per day to pay the necessary fees such as the fund rate and transaction fee generated by the fund portfolio. The management fee will be reflected in the change in net worth, that is, it will be presented in the form of 'deducting the value of the corresponding leveraged ETF', and it will only be charged at 0 o'clock Singapore time. If you do not hold the product at that time, there will be no cost.