CSOP Asset Management, the manager of the $10 billion leveraged exchange-traded fund tracking SK Hynix Inc., has increased the cap on options utilization from 25% to 50% of the product’s net asset value. This move, which became effective on June 22, 2026, aims to provide greater flexibility in managing the fund's exposure to SK Hynix shares amid rapid asset growth and heightened market volatility. The Hong Kong-listed CSOP SK Hynix Daily 2x Leveraged ETF has experienced substantial inflows, attracting nearly $1.6 billion in fresh demand in 2026, surpassing products tied to U.S. tech giants like Tesla Inc. and Microsoft Corp. It ranks as the fourth most traded ETF in Hong Kong, with assets under management of approximately HK$19.8 billion as of March 10, 2026.
The original strategy, implemented on December 12, 2025, allowed for options premiums up to 25% of NAV to secure leveraged exposure, complementing existing total return swap arrangements. Swaps remain the primary investment tool, with options serving as a supplementary mechanism. The decision to increase the options cap reflects the manager's need for enhanced liquidity management and cost efficiency as the fund's size expands. This enables the fund to secure additional exposure and improve operational flexibility when swap contracts alone might face counterparty capacity limits.
Despite the significant size and trading volume of the SK Hynix leveraged ETF, Wang Yi, chief investment officer of CSOP Asset Management, has downplayed its impact on the South Korean chipmaker’s stock swings. He stated that the ETF’s trading has shown little correlation with SK Hynix’s stock volatility and that CSOP’s analysis found only a limited impact from the fund’s daily rebalancing. However, the increased reliance on options for hedging and exposure management is a direct response to the growing volatility in major Korean semiconductor stocks and the fund's rapid asset growth. The estimated annual average daily tracking difference for the product is expected to increase from -0.06% to -0.15% due to higher portfolio construction costs associated with using options.
