The latest financial derivative, the Leveraged EFT will be available on CoinTiger at 16:00 on 26 March 2020 (UTC+8).
* Please update your CoinTiger APP to the latest version.
Initial Batch of Underlying Pairs:
BTC3L/USDT(3x BTC long）
BTC3S/USDT(3x BTC short)
ETH3L/USDT(3x ETH long）
ETH3S/USDT(3x ETH short）
You could diversify investments in this derivative with the easiest ways by buying (long) or selling (short) with leverage applied.
A leveraged exchange-traded fund (ETF) is a product that uses financial derivatives and debt to amplify the returns of an underlying token. It often aims for a 2:1 or 3:1 ratio. For example, if the underlying token rises 1%, the corresponding 2x or 3x leveraged ETF rises 2% and 3% respectively, while the -1x and -2x products fall 1% and 2% respectively.
A leveraged ETF is essentially a fund managed by a professional financial team. Each ETF product corresponds to a certain number of futures contract positions. The fund manager can dynamically adjust the futures positions so that the entire fund share can maintain fixed leverage 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 constantly leveraged investment portfolio without needing to understand the specific mechanism.
What are the characteristics of the ETF?
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:
1.Similar to spot trading with no margin required: users can trade this leveraged product just as they would trade a spot product.
2.No risk of liquidation: Due to the inherent characteristics of leveraged ETF products, we will regularly rebalance the fund’s investment portfolio, so investors do not need to worry about the risk of liquidation.
Investment risk:
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. This product subjects to the derivative with high risk. Please watch out the risk in investment.
Here are some common scenarios
1. Michelle is buying BTC today and she thinks that BTC will rise tomorrow. Therefore, she used 10,000 USDT to buy BTC3L(3x Long) today and if BTC rises 20% the next day, leveraged ETF will return a [20%x3=60%] to Michelle and 10,000 USDT used for investment becomes 16,000 USDT.
2. Michelle is buying BTC today and she thinks that BTC will decline tomorrow. Therefore, she used 10,000 USDT to buy BTC3s(3x Short) today and if BTC decline 20% the next day, leveraged ETF will return a [20%x3=60%] to Michelle and 10,000 USDT used for investment becomes 16,000 USDT.
Risk: If Michelle bought BTC3L thinking that BTC will grow afterward, but the BTC price went opposite direction (decline) the amount of loss is also 3 times more than usual. For example, Michelle used 10,000 USDT to purchase BTC3L and BTC price dropped 10% after she bought BTC3L, the 10,000 USDT she used will become 7,000 USDT. However, your loss will not be more than 3 times when your loss reaches 10% due to the rebalance mechanism EFT has.
FAQ: Leveraged ETF FAQ
CoinTiger Team
2020/3/31
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