Samsung Electronics 2x Leverage ETF Returns 1.3% vs 6.4% Stock Gain Due to Volatility Drag

According to Meritz Securities, Samsung Electronics' 2x leverage ETF showed a tracking error of only 0.84% from May 27 to July 6, tracking its net asset value relatively well. However, investors faced significant losses from volatility drag despite the underlying stock rising 6.4%. The 2x leverage product delivered only 1.3% cumulative returns instead of the expected 12.8%.

The decline stems from daily rebalancing mechanics: the ETF increases exposure after price rises and reduces it after declines, creating a short gamma-like structure. While current rebalancing represented only 4.1% of Samsung trading volume, analysts warned that in volatile markets, long-term holders may experience substantially lower returns, with losses amplifying the longer the holding period.