Educational Articles 01: What exactly are YINN and YANG?

What is an ETF?

First, let's understand what an ETF is.

An ETF (Exchange-Traded Fund) is a fund that is traded on an exchange like a stock. They typically represent a basket of stocks or other assets. The price of an ETF fluctuates with the market and can be bought and sold at any time.

What is the YINN ETF?

The YINN ETF, officially known as the Direxion Daily FTSE China Bull 3X Shares, is a special type of leveraged ETF.

Its goal is to provide 300% of the daily performance of the FTSE China 50 Index. The FTSE China 50 Index is an index that includes the 50 largest companies in China.

In Simple Terms:

• Ifthe FTSE China 50 Index goes up by 1% today, YINN aims to go up by 3%.
• If the FTSE China 50 Index goes down by 1% today, YINN aims to go down by 3%.

What is the YANG ETF?

The YANG ETF, officially known as the Direxion Daily FTSE China Bear 3X Shares, is also a special type of leveraged ETF.

However, YANG aims to provide 300% of the inverse daily performance of the FTSE China 50 Index. In other words, its goal is the exact opposite of YINN.

In Simple Terms:

• If the FTSE China 50 Index goes down by 1% today, YANG aims to go up by 3%.
• If the FTSE China 50 Index goes up by 1% today, YANG aims to go down by 3%.

Simple Example

Suppose you have £1000:

• If you buy YINN and the FTSE China 50 Index goes up by 2% in a day, YINN aims to go up by 6%. Your £1000 would become £1060.
• If you buy YANG and the FTSE China 50 Index goes down by 2% in a day, YANG aims to go up by 6%. Your £1000 would also become £1060.

Conversely:

• If you buy YINN and the FTSE China 50 Index goes down by 2% in a day, YINN aims to go down by 6%. Your £1000 would become £940.
• If you buy YANG and the FTSE China 50 Index goes up by 2% in a day, YANG aims to go down by 6%. Your £1000 would become £940.

What is the FTSE China 50 Index?

The FTSE China 50 Index represents the 50 largest and most liquid companies listed on the Hong Kong Stock Exchange (HKEx). It is a recognised benchmark for tracking the Chinese stock market, including companies such as Meituan, Alibaba, Tencent Holdings, Xiaomi Corporation, JD.com, and China Construction Bank (H shares).

Who is it for?

YANG is suitable for those who believe the Chinese stock market will decline in the short term, while YINN is suitable for those who believe the Chinese stock market will rise in the short term.

One critical point to note: investors must understand that this 3x leverage is intended for single-day performance. Over multiple trading days, due to the effects of compounding, the actual returns can significantly deviate from three times the cumulative performance of the index.

Therefore, these are high-risk, high-reward investment tools with significant volatility and risk, making them more suitable for short-term investment, particularly day trading, rather than long-term holding. Investors need to closely monitor market dynamics and adjust their investment strategies accordingly.

Benefits of Investing in this ETF

The YINN ETF attracts investors who are optimistic about the Chinese market and seek significant short-term gains. As a leveraged ETF, YINN offers the opportunity for magnified returns, allowing investors to capitalise on favourable market movements.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. It is crucial to conduct thorough research and seek advice from qualified financial professionals before making any investment decisions. We do not provide any investment advisory services.