Banks shift leveraged ETF risk to crash puts

1. 1As leveraged ETFs gain popularity, demand from banks to hedge tail risk has surged, driving a sharp rise in OTC derivatives such as crash puts and cliquets
2. 2A May email from Goldman Sachs proposed crash cliquets with maximum one-year returns of 14.2–20% to hedge 2x ETFs tracking SK Hynix and Samsung Electronics
3. 3It explained that in the event of a one-day plunge of more than 50%, losses on 2x ETFs could exceed net assets, exposing banks to gap risk

Source Bloomberg · View original ↗

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