Q: What is a leveraged ETF?
A: Leveraged ETF is a kind of financial derivative that are very popular in traditional financial markets. It is a trading product that tracks the increase/decrease amount of the underlying asset (such as BTC) with certain times (such as 2 times, 3 times, or -1 times, -2 times). If the BTC price increases by 1%, the corresponding 2x and 3x leveraged ETF products will increase by 2% and 3%; while the corresponding -1x and -2x products will fall by -1% and -2%. (Risk warning: 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 earn benefits?
A: The leveraged ETF product is essentially a fund managed by a professional financial team. Each ETF product corresponds to a certain number of futures positions. The fund manager dynamically adjusts the futures positions to keep a fixed leverage for the product for a certain period of time. A professional team is responsible for the management and maintenance of the investment portfolio, allowing investors to easily build their own constant leveraged investment portfolio without needing to understand the specific mechanism.
Q: What can I use to buy leveraged ETF products?
A: Leveraged ETFs can be purchased by USDT.
Q: The naming rules of leveraged ETF products?
A: BTC3L stands for 3x leverage long for BTC, while BTC3S stands for 3x leverage short for BTC.
Q: There's never forced liquidation, how does it realize? What is a rebalance mechanism?
A: We usually rebalance the investment portfolios behind the leveraged ETF in every 24 h, in order to avoid the enlargement of the gap between portfolio's leverage ratio and the agreed ratio. When there is a sharp fluctuation and the underlying asset ’s fluctuation range exceeds a given threshold compared to the previous rebalance point (initially we set the threshold for 3x leverage short and long as 15%. In the future, if other leverages available, the threshold may be adjusted.), we will perform temporary rebalancing to control the risk of the investment portfolio. The rebalancing is only for the party that has lost money in the volatile market. For example, if the BTC rises by 15%, we will rebalance the BTC3S product, and will not adjust BTC3L. (Risk warning: 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 and 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 keep an eye on the market, buying leveraged ETF products can save a lot of time and energy.
- Fixed leverage times. For futures holders, as asset prices change, the leverage of the contract may change, which deviates from the original intention of investors. Take investors who buy a contract product with low leverage as an example . When asset prices rise sharply, the leverage times of the investor's contract product will become very high, which deviates from the investor's original risk appetite. The leveraged product leverage ratio is basically constant, which allows 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 to leveraged spot trading funds, the holding rate of leveraged ETF products is lower.
Q: What is the trading fee and daily management fee rate for leveraged ETF products?
A: The trading fee for leveraged ETF products on MXC is 0.2%. In addition, MXC charges a daily management fee for each-time leverage (Now MXC adopts dynamic management fee rate which is displayed on the relevant ETF product's trading page) to pay the necessary fees such as the funding rate and transaction fee. The management fee is reflected in net value and will only be charged at 00:00 Singapore time. If you do not hold the ETF product at the time point, no fees will be incurred.
Q: What is net value? What is the difference between net value and the real-time price?
A: As a fund product, each unit of leveraged ETF product corresponds to a share of the fund. The dynamic actual value of this share is the net value of the leveraged ETF product. Since the product is actively trading in the secondary trading market, the latest transaction price may deviate from the net value. Please note that your order price shall not be too far away from the net value, or you may undergo losses. Meanwhile, when the net value of a leveraged ETF product becomes lower than 0.05 USDT, “Share Merging Mechanism” will be triggered (i.e. 10 shares merge into 1 share with price up 10x and quantity down to 1/10, and the total asset is the same), to improve price sensitivity, bringing better trading experience.
The following is the formula for calculating the net value:
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 the market undergoes a one-direction trend and investors who do not want to assume the risk of liquidation. However, there will be more wearings for ETF products in volatile market with the existence of management fees.
Take the BTC3L as an example. If the daily trend of BTC is + 10%, + 10%, + 10%, + 10%, then the 4-day yield of this product is 185%, higher than 3 times of the 44% increase amount; if the daily trend of BTC is -10%, -10%, -10%, -10%, then the 4-day loss of the product is 76%, lower than the 3 times of 35% decrease amount; However, if the daily trend of BTC is + 10%, -10%, + 10%, -10%, then the product's 4-day yield is -17% where the loss is higher than 3 times of -3% decrease amount of BTC spot trading.
Q: How to buy leveraged ETF products?
A: There is ETF Zone on MXC official website and APP. User can enter the ETF zone and trade the ETF product you want to trade.
Q: How to calculate the rise and fall amount of 3x leverage ETF products?
A: Please check the chart below.
Leveraged ETF is a tradable product that tracks three times the daily profit of underlying assets. Users shall pay attention to the gap between the actual net value of the product and the latest price when placing an order. If you put the order in the opposite direction, there is a risk that the price will approach zero in extreme conditions. Leveraged ETF is a derivative that subjects to high risks. Please watch out the risk in investment.