Don't want to stay up late watching the market, but still want to seize investment opportunities from NVIDIA's wild fluctuations? Now, this wish can be fulfilled.
Today, individual stock leveraged and inverse ETFs, which have already gained popularity in the U.S., have been listed in Hong Kong, launched by Southern Eastern. They are among the first of their kind in Asia. A researcher on second homes specifically spoke with Wang Yi, the head of the quantitative investment department at Southern Eastern.
This new batch of products includes a total of nine ETFs, covering Buffett's Berkshire, AI leader NVIDIA, Musk's Tesla, as well as cryptocurrency-related Coinbase and MicroStrategy.
These individual stock leveraged and inverse products achieve double performance or inverse double performance of the target stocks through swap contracts. In simple terms: if the stock rises by 1%, the double leveraged ETF rises by 2%; if the stock falls by 1%, the inverse double ETF rises by 2%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2ab87a46-2f59-45d6-a6dd-efb7e869c151.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2ab87a46-2f59-45d6-a6dd-efb7e869c151.png"/>
(Image source: Southern Eastern)
Wang Yi mentioned that one of the biggest advantages of this batch of products is that there is no need to stay up late to trade. Previously, to trade NVIDIA, one had to either stay up until midnight or use U.S. stock night trading brokers (which have recently encountered issues). Now, it's possible to trade during the day and also take advantage of information gaps. For example, when the DeepSeek model shocks the AI circle, or when Trump says something that stimulates the market, Asian investors can react immediately while Americans are still asleep.
Additionally, compared to the existing turbos in the Hong Kong market, the ETF mechanism is more transparent, and prices are more publicly available.
In the future, this type of product will definitely increase, and may even expand to popular Chinese concept stocks.
Wang Yi mentioned, &#34;This is a gradual path, similar to the development history of leveraged and inverse products in the Hong Kong market. Initially, only non-Hong Kong stock index products were allowed, and then gradually products related to the Hang Seng Index, State-Owned Enterprises Index, and other Hong Kong stock indices were permitted. In the future, we can also expect to see leveraged and inverse products targeting popular Hong Kong stocks like Tencent, Alibaba, and Xiaomi.&#34;
Everyone can look forward to it. However, it should also be noted that these products are primarily designed for intraday short-term trading. If used well, they can effectively capture market fluctuations and amplify returns in a short period; but if held for the long term, they may suffer significant value loss due to the daily balancing mechanism. In extreme market conditions, tracking deviations may also occur.
Only by understanding these can one enjoy the &#34;double stimulation&#34; while also being &#34;well-informed.&#34;
<h2>Individual Stock Leveraged and Inverse ETFs: Amplifying Returns and Risks</h2>
Individual stock leveraged and inverse ETFs are trading tools focused on single stocks, amplifying or inversely replicating their daily returns through derivatives such as futures, swaps, and options.
Taking the batch of products soon to be listed by Southern Eastern as an example, they utilize swap contracts to track the daily 2x or -2x performance of individual stocks. This means that if NVIDIA's stock price rises by 1% in a day, the 2x leveraged ETF will theoretically rise by 2%, while the 2x inverse ETF will fall by 2%
The original intention of the product design is also determined to be for short-term traders, not for long-term investors. Data from the U.S. market shows that the average holding period for this type of ETF is only about one and a half days, and the underlying assets are mostly high-volatility tech stocks.
So how does Southern Eastern select its underlying assets? Wang Yi said it mainly looks at two points: first, it references which individual stock ETFs are the most popular and have the largest scale in the U.S. market, such as NVIDIA and Tesla; second, it focuses on star companies in the virtual asset field, such as Coinbase and MicroStrategy, which have high market heat and outstanding investment value.
Among this batch of underlying companies, Berkshire Hathaway, owned by Buffett, can be considered an outlier. Last year, when the Berkshire double-leverage ETF was listed on the U.S. stock market, there was controversy, with some saying that Berkshire, as a stable stock, is not suitable for short-term speculation, which is completely contrary to Buffett's advocacy of value investing.
I posed this question to Wang Yi. He explained that for highly volatile trends, leveraged ETFs are prone to losses; however, for stable stocks like Berkshire that trend upward over the long term, leveraged products can actually amplify returns. Since positions are rebalanced daily, the actual returns may exceed the leverage multiple.
Taking the recently surging Hang Seng Tech Index as an example, from January 14 to February 26, the index rebounded by 41% in a one-sided upward trend, while during the same period, the Southern Eastern double-long ETF for the Hang Seng Tech Index rose by 92%, far exceeding the double increase, which is still quite attractive.
Let me also share some operational details: the products from Southern Eastern can be traded in Hong Kong dollars or U.S. dollars, with a minimum investment amount of about HKD 780 for 10 units. The management fee is 1.6%, and the expected annual recurring expense ratio is 2.00%.
<h2>NVIDIA Soars, U.S. Individual Stock ETFs Explode</h2>
As early as 2018, Europe was the first to launch individual stock ETFs. In the U.S., although leveraged ETFs have been around for over a decade, regulators have been hesitant about individual stock products, believing that these products lack diversification and &#34;violate the mission of ETFs.&#34;
It wasn't until July 2022, amid a tug-of-war between financial innovation and investor protection, that the U.S. Securities and Exchange Commission (SEC) finally relented and approved the first batch of individual stock leveraged ETFs.
AXS Investments became the first &#34;pioneer,&#34; granted permission to launch long and short products targeting companies like Tesla, NVIDIA, and Pfizer, with leverage multiples ranging from 1x to 2x. Subsequently, Direxion and GraniteShares also launched several similar products.
In the year following their launch, these products were lukewarm, with total inflows for the entire year of 2023 being less than $1.4 billion, and the market size being below $2 billion.
During this period, Tesla was the absolute king of individual stock leveraged ETFs, with its stock price's extreme volatility being a favorite among short-term speculators. In contrast, some products with relatively stable stock price fluctuations, such as Nike and Pfizer-related individual stock ETFs, were closed and delisted less than a year after their launch due to lack of demand.
Just as Wood's ARK rose almost simultaneously with Tesla, the explosive popularity of individual stock leveraged ETFs is also complementary to the market's enthusiasm for NVIDIA.
With the explosion of the AI boom in 2023, NVIDIA quickly surpassed Tesla to become the new leader in the single-stock ETF market. By July 2024, the scale of single-stock products targeting NVIDIA reached $6 billion, accounting for over 50% of the single-stock ETF market, while the share of Tesla-related products dropped from two-thirds a year ago to one-fifth.
The most dazzling among them is the NVIDIA Double Long ETF (NVDL) under GraniteShares, which saw its scale soar from about $210 million to nearly $5 billion in just over six months, frequently appearing on the list of ETFs with the highest daily trading volume. In the years 2023 and 2024, when NVIDIA continuously created AI myths, NVDL's gains reached 432% and 344%, respectively.
In these two years of strong faith in AI and high animal spirits, the market loves NVIDIA even more, especially the 2x leveraged NVIDIA, and this trend of chasing high leverage investments quickly spread to the cryptocurrency sector.
In August 2024, Defiance ETFs announced the launch of MSTX, the first 1.75x long ETF targeting MicroStrategy. Considering that MicroStrategy itself is a high-leverage vehicle for Bitcoin, this has been described by financial commentators as an extreme case of &#34;leverage on leverage.&#34;
<h2>The &#34;Leverage Game&#34; of Short-term Traders</h2>
From a product design perspective, single-stock leveraged ETFs carry higher risks than index leveraged ETFs, as they lack the diversification effect of an index, further amplifying the volatility of a single stock.
In January of this year, when DeepSeek emerged and shook the narrative of AI in the U.S. stock market, leading to a sharp decline in NVIDIA's stock price, related leveraged ETFs experienced a disastrous day. ETFs like NVDL, which are 2x long on NVIDIA, plummeted over 33% in a single day, catching many investors off guard.
It is also important to note that because leveraged ETFs rebalance their positions daily, holding them long-term can result in a significant &#34;decay&#34; effect. For example, if a stock first drops 10% and then rises 11.1%, it will ultimately return to its original point; however, if it is a 2x leveraged ETF, it will first drop 20%, then rise 22.2%, but will only return to 97.8% of its original value, resulting in a loss of 2.2%.
This decay is particularly evident during periods of high market volatility; the longer the holding period, the greater the decay. An extreme case occurred from November 2022 to November 2023, where Tesla's stock price increased by 5.5%, but the 2x long Tesla ETF TSLL fell by 13%, while the 1x short Tesla ETF TSLS dropped by 29.6%.
Additionally, in some cases, the tracking accuracy of these products can also deviate. In December 2024, as Bitcoin surged, MicroStrategy, known as the &#34;largest Bitcoin proxy&#34; in the U.S. stock market, experienced rapid growth, but the 2x long MSTR leveraged ETFs—MSTX and MSTU—encountered issues, failing to provide the expected double upside and instead declining more than double.
The losses exceeded what should have been lost, and the gains were less than what should have been gained, leaving investors quite frustrated. The issuers explained that due to the rapid growth of MSTX and MSTU, the swap contracts provided by major brokers reached their limits, forcing them to turn to options contracts to achieve their goals. However, the large bid-ask spreads in options and greater price volatility led to increased tracking errors for the ETFs
But the fundamental reason is that the growth of these high-leverage ETFs has exceeded the risk tolerance of some Wall Street institutions. Just think about it, Bitcoin itself is very volatile, and MicroStrategy's stock price adds a premium based on Bitcoin, and with the leverage of ETFs doubling down, it gives a sense of building a precarious structure on top of another precarious structure.
In a highly volatile market, the tracking error of these ETFs can also increase.
In this regard, Wang Yi explained that under extreme market conditions, such as a single-day drop of more than 25%, American leveraged ETFs need to make protective adjustments, which may cause the ETF's performance to deviate from its theoretical return. &#34;For example, if the underlying stock rebounds after a 25% drop, due to the ETF having reduced its position, it may not fully capture the rebound gains, resulting in a decline greater than the theoretical value.&#34;
<h2>Advantages of Hong Kong Stock Leveraged and Inverse Products: Say Goodbye to Staying Up Late and Seize Information Asymmetry</h2>
Although individual stock leveraged and inverse ETFs carry high risks, if used properly, especially for short-term traders, they are extremely valuable trading tools. The products from Southern Eastern Capital have special advantages for Asian investors, particularly in terms of trading convenience and application scenarios.
In fact, behind the popularity of U.S. stock individual ETFs, Asian investors contribute significantly. &#34;Asian investors account for a considerable share of trading in U.S. leveraged and inverse products, both in terms of trading volume and the scale of funds contributed,&#34; Wang Yi stated. &#34;We have observed that investors in the Hong Kong and South Korean markets hold a large number of such products, and these trades mainly occur during Asian trading hours.&#34;
Currently, Asian investors trade U.S. stock ETFs mainly through two methods: either staying up late to trade during U.S. stock trading hours or trading through U.S. night trading brokers. However, the latter has recently exposed stability issues.
Compared to similar products listed in the U.S. stock market, the products launched by Southern Eastern Capital this time precisely address this pain point, allowing Asian investors to trade U.S. individual stock leveraged and inverse products within their own time zone.
Trading U.S. individual stock leveraged ETFs during Asian hours has another unique advantage: the ability to respond more promptly to important information released after the U.S. market closes.
Wang Yi pointed out: &#34;There are often many events in the U.S. at night, which correspond to the Asian trading hours in Hong Kong. For example, U.S. companies usually release earnings reports after the market closes, and Trump often makes statements that may affect the market after U.S. stock trading hours.&#34;
It is particularly noteworthy that with the rise of China's AI industry, these information asymmetry trading opportunities have become more apparent. &#34;The investment logic in the AI field has changed, mainly due to the emergence of Chinese AI models like DeepSeek, which have broken the monopoly of U.S. companies,&#34; Wang Yi stated. &#34;When new technological breakthroughs or product releases occur in the Asia region, one can fully utilize the information generated during these Asian hours for trading decisions, while the U.S. stock market is still asleep.&#34;
Additionally, compared to ETF products listed in the U.S., Hong Kong-listed U.S. individual stock leveraged ETFs have a potential tax advantage. The products from Southern Eastern Capital adopt a trust structure, which, in principle, does not distribute dividends, thus avoiding the 30% withholding tax issue on dividends for similar U.S. products
Compared to existing derivatives in the Hong Kong market (such as warrants), individual stock leverage and inverse ETFs also have significant advantages.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5c0d42d8-da94-47bc-947b-21aa4c858396.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5c0d42d8-da94-47bc-947b-21aa4c858396.png"/>
(Image source: Southern Eastern)
&#34;Hong Kong is traditionally considered one of the largest warrant markets in the world,&#34; said Wang Yi. &#34;The problem with the warrant market is that there is insufficient transparency, as they are issued by various banks. The prices at which you buy and sell are not very transparent.&#34;
In contrast, ETFs offer higher transparency. &#34;Many traders prefer exchange-traded products because the secondary market prices are very transparent; whether they are expensive or cheap, you know you can transact at that price.&#34;
Additionally, Wang Yi pointed out that there are many warrant codes that are difficult to remember, while ETF codes are relatively fixed, making them easier for investors to remember and track. Data shows that since the introduction of leveraged inverse ETFs in the Hong Kong market, the size and market share of the warrant market have declined by more than half.
This article is sourced from: Second Home Researcher, original title: &#34;You can now trade a 2x NVIDIA ETF in the Hong Kong stock market.&#34;

The leveraged and inverse ETFs that have become popular in the U.S. have been listed on the Hong Kong stock market, allowing investors to trade popular U.S. stocks like NVIDIA, Tesla, and MicroStrategy with double the volatility without staying up late. Moreover, when DeepSeek shocks the AI market and Trump's policies impact the globe, Asian investors can take advantage of information asymmetry to seize opportunities in the soaring and plummeting U.S. stock market

- Southbound East Ying has launched nine leveraged and inverse ETFs in Hong Kong, including those tracking Nvidia and Tesla, allowing local investors to trade without staying up late.  
- These products utilize swap contracts to achieve double performance, making them suitable for short-term trading, although they carry significant risks due to daily rebalancing.  
- The introduction of these ETFs offers Asian investors a chance to react to U.S. market news during their trading hours, potentially capitalizing on information advantages.

You can trade a double NVIDIA ETF on the Hong Kong stock market now