--- type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/42607781.md" description: "$XL2CSOPHYNIX(07709.HK)$Sandisk(SNDK.US)$Micron Tech(MU.US)Why are 2x leveraged products not suitable for long-term holding?07709 has been plummeting continuously, from 190 down to over 60, which is terrifying. I've been wanting to write an article about leverage risks.First, understand the underlying logic of 2x leveraged products: 2x long is not a simple *2. In reality, it uses Daily Leverage Reset, with returns calculated on a daily compounding basis. Therefore, long-term holding mainly faces two issues.1. Leverage Decay (Volatility Drag)For example: Up 10% on the first day, down 10% on the second day.Underlying stock: 100 → 110 → 99, a loss of only 1%.2x product: 100 → 120 → 96, a loss of 4%.Because the 2x product resets its leverage daily. If the market is in a volatile pattern of up one day, down the next over the long term, each fluctuation consumes a portion of the NAV. So, the more intense the volatility and the longer the time, the more obvious the leverage decay (Volatility Decay) becomes.2. NAV Compression (Recovery Drag)The biggest problem isn't the drag, but the NAV compression.For example: SK Hynix falls from 100 to 50. The underlying stock only needs to rise 100% to get back to 100.However, due to daily compounding and leverage effects, the NAV of the 2x product may have already fallen from 100 to around 30. Even if SK Hynix later doubles again, the 2x product would only rise from 30 to 60, still far from the original 100.So, we've also seen people calculate that the underlying stock is almost back to breakeven, while the 2x product is still far away.Therefore, the biggest risk of leveraged products is not actually "falling fast," but rather:1. High volatility oscillations will continuously generate leverage decay;2. Prolonged declines will continuously compress the NAV, increasing the required future gain to break even.2x products are more suitable as trend trading tools, not for long-term holding waiting for a recovery.The memory sector has experienced a magnificent main upward wave, entering a mid-term phase with excessive volatility. StockPro SanDisk warned early on to deleverage and hold the underlying stock." datetime: "2026-07-13T04:12:42.000Z" locales: - [en](https://longbridge.com/en/topics/42607781.md) - [zh-CN](https://longbridge.com/zh-CN/topics/42607781.md) - [zh-HK](https://longbridge.com/zh-HK/topics/42607781.md) author: "[股海散修](https://longbridge.com/en/profiles/23678023.md)" --- # $XL2CSOPHYNIX(07709.HK)$Sandisk(SNDK.US)$Micron Te… ### Related Stocks - [07709.HK](https://longbridge.com/en/quote/07709.HK.md) - [SNDK.US](https://longbridge.com/en/quote/SNDK.US.md) - [MU.US](https://longbridge.com/en/quote/MU.US.md) - [SKHYV.US](https://longbridge.com/en/quote/SKHYV.US.md) - [SKHY.US](https://longbridge.com/en/quote/SKHY.US.md) ## Comments (12) - **SNDK · 2026-07-13T23:37:44.000Z**: Is the example you gave miscalculated? The underlying stock from 50 to 100Two times 30 should be 120, right? Even accounting for slippage, it shouldn't be just 60. - **股海散修** (2026-07-14T00:09:26.000Z): Thanks for the correction, I indeed miscalculated in my example. 🙌🏻 What I meant to express is that after experiencing a decline and volatility, due to the volatility decay generated by daily rebala - **暴打青春鸟 · 2026-07-13T10:46:20.000Z**: All investments incur costs, unless you're just earning interest on deposits. Even when buying stocks, costs like funding deposits, exchange rates, brokerage fees are all friction. The simplest approach is to treat leveraged products as independent products, and not constantly calculate back and for - **A股难民营营长 · 2026-07-13T05:32:26.000Z**: @炒美股養家666 Family-supporting bro - **三思又三思 · 2026-07-13T04:22:34.000Z · 👍 1**: 190-60 is indeed too outrageous. Many people were bullish on storage, and there was also the ADR listing, good performance, strong demand, and then it plummeted. - **股往金来No1** (2026-07-13T04:23:27.000Z): If everyone thinks it will rise, it won't rise. - **三思又三思** (2026-07-13T04:24:57.000Z): Not everyone thinks it will rise; it's a matter of its reasonable price. Last month, not to mention 190, even when it was at 150 and you had the chance to add to your position at over 60, you still wo - **股海散修** (2026-07-13T04:25:33.000Z): Long-term bullish on AI and storage, and the storage sector's performance is so good, but I didn't expect it to be hit this hard🫠 - **打板起家 · 2026-07-13T04:17:18.000Z · 👍 5**: Hindsight expert - **股海散修** (2026-07-13T04:18:48.000Z): Actually, I'm not evaluating SK Hynix, but discussing the tool. A good investment first requires understanding the tool itself. As for whether SK Hynix will rise or fall in the future, that's another - **拿不住就去进厂** (2026-07-13T04:34:33.000Z): They're warning you about leverage risks for your own good.