"Just Holding on Can Be Dangerous"... How to Accelerate Principal Recovery in Samsung Electronics and SK hynix Leveraged ETFs [Weekend Money]

An analysis has found that, when experiencing losses from single-stock leveraged ETFs, it is necessary to exclude emotional trading and instead adopt a systematic capital deployment strategy in order to shorten the period required to recover principal.

According to DB Financial Investment, as volatility in the domestic stock market rapidly intensifies, investors' principal losses from single-stock leveraged products are increasing. In this situation, experts advise against making emotionally driven trades. Taehyun Seol, a researcher at DB Financial Investment, said, "The loss aversion that occurs during a market downturn impedes the ability to objectively carry out stop-loss actions or adjust investment weights, leading to unplanned capital injections. It is essential to exclude intuition or vague hopes for recovery and instead establish a quantitative, data-driven response system."

The probability that both Samsung Electronics and SK hynix enter a simultaneous downward phase when the market turns bearish is just 44.6% and 30.5%, respectively. This indicates that each stock has its own independent price trajectory, making it necessary to implement rules-based strategies that consider the unique characteristics of each stock. In a bear market, the stock return patterns between Samsung Electronics and SK hynix show distinct structural differences. Researcher Seol explained, "When entering a bear market, Samsung Electronics tends to experience a relatively moderate decline followed by a gradual recovery, whereas SK hynix typically sees a deeper price drop but then rebounds sharply, displaying a high-volatility pattern."

Leveraged products based on Samsung Electronics and SK hynix experienced rapidly expanding losses due to the accumulation of daily volatility decay during declining or stagnant markets. Researcher Seol pointed out, "The longer the bear market persists, the more the recovery potential of leveraged products becomes structurally impaired compared to the underlying stocks. Unconditional long-term holding in a loss state after reaching a peak significantly reduces the possibility of principal recovery due to the structural decay inherent in leverage."

To prevent structural losses in single-stock leveraged products and shorten the principal recovery period, it is essential to establish clear, quantitative capital deployment guidelines. Researcher Seol suggested a strategy of staged capital injections according to maximum drawdown (MDD) ranges.

The analysis found that if Samsung Electronics (1x) enters the -30% to -35% MDD range, the median period for principal recovery is 253 trading days. If 50% of the initial investment is additionally injected at this stage, the recovery period shortens to 184 trading days. For Samsung Electronics leveraged (2x) products, entering the -30% to -35% MDD range puts the median recovery period at 354 trading days, but with an additional 50% capital injection, this is reduced to 193 trading days.

In the case of SK hynix leveraged (2x) products, entering the MDD range below -45% without additional investment requires 1,260 trading days for principal recovery, but an additional 30% invested reduces the recovery period dramatically to 152 trading days.

Researcher Seol emphasized, "Because the analysis applied double the daily closing return, it is important to note that, after accounting for real market volatility decay and tracking errors, the actual principal recovery period may be longer than the numbers presented. Therefore, in order to quantitatively manage heightened market risk, it is essential to consider both the extent of MDD contraction and the proportion of additional capital deployed when estimating the principal recovery period and its probability."

This content was produced with the assistance of AI translation services.