Retail investors flock to ‘2x bets’... 150,000 joined just in January

Aggressive “double-leveraged” investing is soaring. Last month, the number of investors who completed mandatory training to trade leveraged and so‐called “double inverse” (2x inverse) exchange-traded products (ETPs) nearly hit an all-time high. While these products offer the potential for high returns, they also carry high risk and extreme volatility, making long-term investing difficult and fueling worries that the market could degenerate into a short-term speculative frenzy.
According to data on “leveraged ETP training participants” that the office of Democratic Party of Korea lawmaker Lee Jeong-moon obtained from the Korea Financial Investment Association (KOFIA) at the request of this newspaper on the 8th, 147,961 people took leveraged ETP training between January 2 and 29. Completing this course allows investors to trade both leveraged and double-inverse products. The figure is just shy of the record 149,772 recorded in January 2021. At that time, amid a liquidity-driven rally following Coronavirus disease 2019 (COVID-19), the Korea Composite Stock Price Index (KOSPI) broke through the 3,000 mark for the first time in history. Any investor wishing to trade domestic or overseas leveraged or double-inverse ETPs—whether Exchange-Traded Funds (ETF) or ETNs—must first complete an online course at the Korea Institute of Financial Investment under KOFIA. The course costs 4,000 won and lasts one hour. The number of people who finish this training serves as an indicator of incoming demand for leveraged and double-inverse products.
The unprecedented surge in the stock market is seen as the main reason nearly 150,000 new investors have rushed into these high-risk products. In January, the KOSPI and the KOSDAQ Index jumped 23.97% and 24.2%, respectively, setting new records for monthly gains. As the KOSPI climbed toward the 5,200 level and the KOSDAQ Index approached 1,100, retail money poured into leveraged and double-inverse ETFs that promise large profits from small amounts of capital over short periods. The rush was so intense that on January 26 the website of the Korea Institute of Financial Investment even suffered a server outage.
However, as aggressive buying of high-risk products accelerates, investors are being directly exposed to index volatility. Leveraged products track twice the daily return of the underlying index, amplifying gains in a rising market but doubling losses when the market falls. With KOSPI volatility recently increasing, short-term speculative bets could end up magnifying losses instead. There are also concerns that if the index undergoes a sharp correction, forced selling from margin calls could flood the market and further exacerbate volatility.
Until recently, the number of people completing leveraged ETP training hovered around a monthly average of 10,000. For all of 2024, only 119,523 investors took the course. But after the KOSPI topped 4,000 for the first time last October, the number of investors trying to jump on the rally rose rapidly. For the full year, the total swelled to 205,403. This year, in just a single month, roughly two-thirds of last year’s total number of participants have already signed up, underscoring how steep the increase has been.
nodelay@fnnews.com Park Ji-yeon Reporter