Tip: In order to let everyone understand ETF products more comprehensively and professionally, the following content will be updated from time to time.
Q: What is a leveraged ETF product?
A: Leveraged ETF products are a class of financial derivatives that are very popular in traditional financial markets. It is a trading product that achieves a certain multiple (such as 2 times, 3 times or -1 times, -2 times) of tracking the target asset returns on a daily basis on the premise of a given target asset (such as BTC). If the BTC price rises by 1%, the net value of the ETF products with a leverage of 2 times and 3 times will increase by 2% and 3%, while the corresponding -1 times and -2 times the net value of the products will fall by -1% and -2%. ( Risk reminder: if the direction is wrong, there will be a risk that the price will approach zero in extreme conditions )
Q: How does the leveraged ETF product realize the corresponding benefits?
A: The leveraged ETF product is essentially a fund managed by a professional financial engineering team. Each product corresponds to a certain number of futures contract positions. The fund manager dynamically adjusts the futures positions to keep the entire fund share fixed for a certain period of time. Leverage. The management and maintenance of the investment portfolio are carried out by a professional team, allowing investors to easily build their own constant leveraged investment portfolio without having to understand the specific mechanism.
Q: What is the subject of leveraged ETF products?
A: In the first phase, we launched the leveraged ETF product to track the increase of BTC. In the later period, we will launch leveraged ETF products in other popular currencies according to market conditions.
Q: What can I use to buy leveraged ETF products?
A: Leveraged ETFs can be purchased with USDT.
Q: The naming rules of leveraged ETF products?
A: BTC3 times more products as an example, its English name is BTC 3X Long, short for BTC3L. For BTC3 times bearish products, its English name is BTC 3X Short, short for BTC3S.
Q: How to realize never open positions? What is a rebalance mechanism?
A: We regularly rebalance the investment portfolio behind leveraged ETF products so that the combined leverage ratio and the agreed ratio do not deviate too much. Under normal circumstances, we will rebalance positions every 24 hours, and when there is a sharp fluctuation, if the underlying asset ’s fluctuation range exceeds a given threshold compared to the previous rebalance point (in the beginning we set the threshold to 3 times long 15%. In the future, if other multiples are used, the threshold may be different.) We will also temporarily rebalance to control the risk of the investment portfolio. The temporary rebalancing is only for the party that has lost money because of this fluctuation range, that is, if the BTC increase is 15%, we will rebalance the -3 times leveraged ETF and make no adjustments to other products. ( Risk reminder: if the direction is wrong, there will be a risk that the price will approach zero in extreme conditions )
Q: What are the similarities and differences between leveraged ETF products and futures contract products?
A: Similar to futures contract products, leveraged ETF products are derivatives with leverage effects, which can amplify investors' returns and become a cheap risk hedging tool. However, compared to futures contracts, leveraged ETF products have the following unique characteristics:
No margin required, no risk of liquidation ( risk warning: if the direction is wrong, there will be a risk that the price will approach zero in extreme conditions ). For investors who don't have much time to watch, buying leveraged ETF products can save you a lot of energy.
Fixed leverage multiples. For futures holders, as asset prices change, the leverage of contract positions may change, which deviates from the original intention of investors. For example, investors have established a low leveraged short futures position. When the asset price rises sharply, the investor's position leverage will become high, which deviates from the investor's original risk appetite. The leveraged product leverage ratio is basically constant, allowing investors to better comply with their investment plans.
Q: What are the similarities and differences between leveraged ETF products and leveraged spot trading?
A: Compared with leveraged spot trading, leveraged ETF products also do not require margin, and there is no risk of being liquidated. At the same time, compared with leveraged spot trading funds, the holding rate of leveraged ETF products is lower.
Q: What is the rate of leveraged ETF products?
A: The transaction fee for trading leveraged ETF products on Hotcoin is 0.2%. At the same time, we will charge a certain daily management fee for each leverage (usually 0.1%, which will be adjusted according to market fluctuations in the future. The specific management fee for each target can be adjusted). (View on the corresponding transaction page) to pay the necessary fees such as the fund rate, transaction fee and other fees generated by the fund portfolio. The management fee will be reflected in the change in net worth and will only be charged at 00:00 Singapore time. If you do not hold the product at that time, there will be no fees.
Q: What is unit net worth? What is the difference between unit net worth and price?
A: As a fund product, each unit of leveraged ETF product corresponds to the corresponding share of the fund. The dynamic actual value of this share is the unit net value of the leveraged ETF product. Because the product is actively trading in the secondary trading market, the latest transaction price may deviate from the unit's net value. We also list the unit's net value and the latest transaction price at the same time. I hope investors can realize that the price you buy / sell should not be higher than the unit There is a large deviation in the net value, otherwise in theory you will suffer a corresponding loss. At the same time, when the net worth price is lower than a certain threshold (0.05U in the initial stage), the platform will perform a consolidation operation on the variety (change the net worth price to 10 times before the merger, but the corresponding quantity will also become 1/10 before the merger, The user's total assets will not be affected in any way) to improve the sensitivity of price changes and optimize the trading experience.
The formula for calculating the fund's net worth is as follows:
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 tk−1, can the current rate of return be M times the corresponding rate of return on the underlying asset.
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.
Q: What kind of investors are more suitable for leveraged ETF products?
A: As a product that has been tested in traditional financial markets, leveraged ETF products are suitable for most investors. However, this product is particularly suitable for investors who believe that asset prices will trend and investors who do not want to assume the risk of liquidation. Due to the existence of management fees and the inherent characteristics of leveraged ETF products, the product will suffer greater losses under repeated market fluctuations.
Example 1:
For example, if you look at multiple products with three times positive BTC, if the daily trend of BTC is + 10%, + 10%, + 10%, + 10%, then the 4th day yield of this product is 185%, which is higher than 3 times 44% of the 4th spot income; if the daily trend of BTC is -10%, -10%, -10%, -10%, the 4th day loss of the product is 76%, which is less than the 4-day spot loss 3 times 35%; if the daily trend of BTC is + 10%, -10%, + 10%, -10%, then the product's 4th day yield is -17%, which is underperforming the 4th day spot yield -3% of 2%.
Example 2:
If the daily trend of BTC is + 10%, -10%, + 10%, -10% ... If this trend continues for 100 days, then the yield of BTC's 3L and 3S products is -99.1%, net worth There is a risk that prices will tend to zero.
Example 3:
If BTC continues to rise in the first 10 days, with a total increase of 200%, and then immediately continues to decline for a period of 10 days, with a total decrease of 200%, then the net value price of BTC's 3L and 3S products will tend to zero. At the same time, the process of "share consolidation" will be triggered to ensure volatility.
In addition, in other extreme volatile market conditions, such as continuous skyrocketing and slumping, there will also be a risk that the net value of 3L and 3S products will tend to zero.
