Leverage ETFs Amplify Market Volatility, Individual Investors Bear Hedging Costs: Capital Markets Institute

According to Lee Hyo-seop, director of the Financial Industry Division at Korea Capital Markets Institute, leverage-linked exchange-traded funds (ETFs) and excessive margin trading have intensified market volatility last month, with retail investors bearing the full burden of hedging costs. Speaking at the 2026 Maeil Business Capital Markets Forum, Lee noted that when leverage ETFs are hedged, a 'short gamma' effect occurs as hedging volumes concentrate at market close, further amplifying price swings. He stated that individual investors who entered through leverage face not only the hedging costs but also management fees they would have avoided with outright purchases, shouldering the volatility spike alone.
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