Exchange Lists First Domestic ETN Tracking UK Stock Market and Overseas Straddle Strategy

[Asia Economy Reporter Song Hwajeong] The Korea Exchange announced on the 20th that it will list a total of three products on the KOSPI market on the 22nd, including the FTSE100 Exchange Traded Note (ETN) issued by Korea Investment & Securities and two overseas short straddle ETNs (Euro Stoxx 50 5% OTM, S&P 500 4% OTM).

All three products are new products being listed for the first time in Korea. First, the TRUE FTSE100 ETN is the first domestic product tracking the UK stock market, following the 'FTSE100 Total Return Declared Dividend' index, which is based on the UK's representative FTSE100 index. The underlying index corresponds to a total return index that combines the returns of the existing FTSE100 index with the dividend income of the index components.

The TRUE overseas short straddle ETNs (two products) are the first domestic ETN products employing a short straddle strategy using options on major overseas market indices. By simultaneously selling call and put options on the Euro Stoxx and S&P 500 indices, if the index remains within a certain range (5%, 4%) over a month, the option premiums are reflected as profits. However, losses from excessive volatility may offset the premium income.

The Exchange explained, "ETNs are unsecured and uncollateralized derivative-linked securities with credit risk from the issuing securities company, so it is necessary to check information related to the issuer's financial soundness when investing." It added, "Additionally, since the ETN market price may not perfectly track the underlying index movement, real-time indicator values are provided as investment reference indicators, so investors should refer to these."

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