With the updated re-balancing rules, the leveraged ETF product now regularly re-balances to a target leverage (2.3X) if a certain criterion is met at 0：00 UTC+8 on a daily basis; Besides the scheduled re-balancing, when the real-time leverage of the product is larger than 3x, it will re-balance as well.
Below are the new re-balancing rules:
1） Irregular re-balancing： When the real-time leverage is over 3 times, irregular re-balancing will be triggered. The leverage will be adjusted to 2.3 times.
2) Regular re-balancing： Everyday at 0：00 UTC+8, when the real-time leverage is less than 1.8 times or above 3 times； or the underlying asset price changes drastically (e.g. up or down over 1 % on contract index price), regular re-balancing will be triggered to adjust the leverage to 2.3 times.
3) After the upgrade, ETF’s market volatility will decrease and frictions over a longer time will be reduced; but it is far from completely avoiding the long-time frictions. The ETF performs better in a one-sided market as it will use profit to increase position and decrease position when there is a loss, but it is not suitable for long term holding and performs bad in a swinging market.
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About Leveraged ETF
The leveraged ETF product re-balances to a target leverage if a certain criterion is triggered. When it re-balances, profit will be used to expand the position while the loss will lead to decrease of the position. When trading with ETFs, you do not have to pay a margin. You can simply buy and sell it to enjoy increased exposure like you are trading with leverage. ETF products are managed and hedged in the perpetual contract market. We charge a management fee daily to compensate for the funding payment and trading fee which is incurred at perpetual contract markets. No extra funding fee is charged. By optimizing the fund management, the cost and risks for you to get leveraged exposure are significantly reduced.
Risk Warning
Digital currency prices are susceptible to high volatility, which is even more tangible for the leveraged ETF products. Therefore there is a risk to suffer amplified loss. Please fully understand the product and risks involved before trading. Furthermore, the change of an ETF product is not always about the target times of the underlying asset over a certain time span as the result of scheduled or irregular re-balancing. An ETF product is hedged in a perpetual contract market, the profit will expand the position and the loss will decrease the position, which will incur greater friction in a swinging market. Due to the rebalancing mechanism and the holding cost, the ETF is not suitable for long term holding. It has greater fluctuation and higher risk. Please be cautious. For more details, please read instructions about Leveraged ETFs at our Help Center.
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Gate.io Team
Sep 15, 2021
