It moves twice as fast in both directions, but even sideways trading quietly erodes the principal, according to a breakdown by Korean market commentator Meru of the single-stock 2x leveraged ETFs on Samsung Electronics and SK Hynix that listed on May 27, 2026. The headline management fee is a modest 0.29% a year. The real annual cost of holding, once every drag is added up, comes to roughly 14% for the Samsung 2x product and 33% for the SK Hynix 2x product.
A 2x ETF adds exposure equal to the investor's capital. Put in 10 million won, and the fund manager layers on another 10 million won of exposure, mostly through futures, for a combined 20 million won riding on the underlying stock. That's what lets the fund return 2% for every 1% move in the stock. That extra exposure isn't free. Take the Bank of Korea's policy rate (2.75%), subtract the stock's dividend yield, add a 0.5 to 1.5 percentage point premium that shows up when futures get expensive from heavy leveraged demand, then add the 0.29% fee. Samsung's 2x product costs about 2% a year to carry this way, SK Hynix's about 3.5%, higher mainly because its dividend yield is lower, leaving less to subtract. There's a second, bigger cost: volatility drag. Leveraged ETFs reset to exactly 2x exposure every day after the close. The problem shows up after a loss. Say the underlying falls 10%, from 100 to 90, then rises 11.1% the next day, back to 100, exactly where it started. The 2x product falls 20%, to 80, then rises 22.2% (twice 11.1%), landing at 97.78. The stock is flat. The leveraged version is down 2.2%.
A leveraged ETF eventually recovers once the underlying moves back to where it started
Daily rebalancing erodes principal continuously even when the underlying just oscillates with no net move
That drag scales with volatility, roughly as its square, Meru estimates. Samsung's volatility runs around 35%, squaring to about 12%. SK Hynix runs hotter, around 55%, squaring to about 30%. Add those to the base carrying cost and the totals land at roughly 14% a year for Samsung's 2x product, 33% for SK Hynix's. The structure resembles a casino: the house profits not from any single bet, but from running the table and collecting a cut. The manager collects its 0.29% fee steadily, while long-term holders risk losing principal to volatility drag regardless of direction. In a steady uptrend, compounding can push 2x returns above 2x the underlying. Meru's point: in a choppy, directionless market, especially for a stock as volatile as SK Hynix, these products can visibly eat into principal within days.
Why it matters · The advertised 0.29% fee hides a much bigger cost: volatility drag can erode roughly a third of principal per year in the SK Hynix 2x product, a number anyone holding single-stock leveraged ETFs long-term needs to see.
Worth asking · Are 2x leveraged ETFs strictly short-term trading tools, or can they work as long-term holds?