You may have watched the recent CNA video about this South Korean investor who used leverage to achieve his Financial Freedom Retire Early (FIRE) goal but ended up with a 6-figure USD100k loss when the market tanked.
Here’s the video:
https://www.youtube.com/watch?v=JvsuUf-N6Eo
This is a summary of the video if you do not have time to watch it:
The High-Stakes Bet for Early Retirement: Lessons from a South Korean Retail Investor Using Leverage
Background of the investor for context:
Seangun is a South Korean retail investor who was faced with standard monthly savings that would take decades to build a meaningful safety net, So, he decided to bypass slow accumulation entirely and poured his capital into aggressive leverage instruments (leveraged ETF) to fast-track his retirement timeline.
When the broader South Korean market (the Kospi) suffered a brutal correction—plunging nearly 39% in a matter of weeks—Seangun himself was staring down at a six-figure loss (translating to paper drawdowns of over $100k USD equivalent).
In article, I will share why this loss is not as scary as it seems.
Why Losing $100k on Leveraged ETFs Isn’t as Fatal as It Seems
When headline numbers like a USD$100,000 loss pop up, panic usually sets in and it seems like he made a really foolish decision, causing a major loss in his portfolio. But let me share 4 reasons why this may turn out far better than expected.
1. It’s Unrealized: Paper Losses Can Turn Into Paper Gains
The most critical distinction in Seangun’s situation is that these losses are entirely unrealized. Because he hasn’t sold his positions, he hasn’t actually locked in a permanent loss. Just as the market dropped to create these deep red figures, a subsequent market recovery can easily swing those exact same positions back into unrealized gains. As long as he holds through the cycle, a paper loss is just a temporary reflection of market sentiment, not a final verdict.
Remember in 2022, all the big tech sold off due to the bear market caused by Fed’s aggressive interest hike, they later manages to multiple many folds when the market recovered, led by the AI revolution. Companies like Nvidia, Palantir had achieve 10x ~ 20x.
2. The Underlying Assets are ETFs, Not Individual Micro-Caps
Seangun utilised built-in product leverage—specifically targeting broad index or tech-focused leveraged ETFs.
- The Advantage: Individual stocks carry idiosyncratic corporate risk. If you leverage up on a single speculative company and it goes bankrupt, hits accounting scandals, or gets delisted, your capital goes permanently to zero.
- The ETF Buffer: Broad-based or major index leveraged ETFs track baskets of established equities. While they suffer from severe volatility drag and drawdowns during corrections, the chance of the entire index going completely to zero is virtually non-existent. The underlying basket survives, meaning recovery is fundamentally a function of time and market cycles.
In short, ETF’s share price will never go to zero as they constantly cleanse themselves and get rid of the bad performers. While they may grow slower unlike some multi-bagger, they also eliminate the risk of individual companies facing bankruptcy or delisting.
3. No Broker Margin Calls (Cash-Funded Positions)
A traditional margin call is the ultimate portfolio assassin. When an investor borrows cash directly from a broker to trade, a sharp market drop breaches the maintenance margin requirement. The brokerage automatically liquidate your positions at the absolute worst possible market bottom, locking in permanent, realized losses.
- The Distinction: Seangun bought these leveraged products directly with his own cash seed capital rather than borrowing money from a broker.
- The Impact: Because he wasn’t using broker margin, he was immune to forced liquidations. His losses remained strictly on paper. As long as he had the psychological resilience to endure the volatility without panic-selling, he retained full control over when to exit.
Read more about Margin Call here:
Understanding The Risk Of Margins, Selling Naked CALL & PUTS
4. No Options Time Decay (Theta)
Another common shortcut for aggressive traders is buying out-of-the-money call options. Options contracts carry an expiration date.
- The Trap: Even if your long-term thesis is correct, if the market moves sideways or dips temporarily before recovering after your expiration date, your options contract expires completely worthless. Time decay (theta) eats your capital alive.
- The Advantage: By holding leveraged ETFs instead of options, Seangun faced no fixed expiry date. Time was technically on his side; as long as the broader market eventually trended upward over a multi-year horizon, his positions retained their underlying structural recovery mechanism.
Learn more about Options Trading here:
The Newbie’s Guide To Options Trading
The Takeaway
It is agonising watching a six-figure sum vanish on paper and you feel stupid, but what’s worst is trading on margins or putting all capital on options contracts that eat your premium away if the market takes its own sweet time to recover.
While I do not encourage using leverage and has burnt many times with margins call and over leverage, I think if you have to use leverage, then leveraged ETF like Seangun is doing is the safest form of leverage.
Read my lessons learnt from margin calls and over leverage:
6 Lessons Learnt After Losing 551k In 10 Years Of Investing & Options Trading | What Newbies Should Know They Start Investing/ Trading
The 6 Fatal Investing/ Trading Mistakes That Made Me Lose More Than $1M
Lastly, Seangun’s story isn’t just a warning about the perils of chasing early retirement; it’s a reminder that on paper, you only truly lose when you hit sell.
*** SEE MY TRADES & PORTFOLIO ON PATREON ***
If you are interested to find out more about my trades, what shares I am buying/ selling or which options contracts I have opened/ closed, I will be updating them on Patreon (on the same day I made the trades), so do follow me there if you need some reference or inspiration.
Click here to access my Patreon page
*** FOLLOW US ON SOCIAL MEDIA ***
Follow me on Facebook and LinkedIn, to get notified of my latest posts on social media. Or subscribe to my blog (scroll to the bottom of the page) to have my new posts sent directly to your mailbox.
We also have a community passionate about investing, trading, and personal finance over our Telegram or Facebook group. So, join us there for a good discussion, post queries, or simply share your financial knowledge.
*** FREE BEGINNER GUIDE TO OPTIONS TRADING ***
Keen to learn about options trading but do not wish to pay for expensive courses, this newbie guide will help gain the knowledge and fundamentals to understand options better. And it’s totally free!
The Newbie’s Guide To Options Trading
*** FREE MOTIVATIONAL BOOK ***
If earning more money from your investment does not excite you anymore, you may be seeking a purpose that brings fulfillment and meaning in life. I have written a motivational book that may be useful to you in some ways.
Click here to download my motivational book
*** BUY ME A CUP OF COFFEE ***
If my blog has benefited you in some ways and you would like to offer a token of appreciation, you may do so via this page. Thank you very much for your support!
Click here to support the site
*** MUST-READ BLOG POSTS ***
The day that I lost everything….
I Was Margin Called, IBKR Liquidated ALL My Positions & Realised S$540k (USD400k) Worth Of Losses
Sharing these 6 fatal mistakes in investing and options trading so you can avoid these pitfalls
The 6 Fatal Investing/ Trading Mistakes That Made Me Lose More Than $1M
After accumulating more than 600k of unrealized losses on my portfolio, I wrote this article to encourage friends and investors who are also losing a lot of money to the market.
If You Are Feeling Depressed From Losing Lots Of Money In The Stock Market, Here’s An Article For You
The precious 6 lessons I learnt after cutting more than half a million of losses in the stock market through bad investments and risky trades.
6 Lessons Learnt After Losing 551k In 10 Years Of Investing & Options Trading | What Newbies Should Know They Start Investing/ Trading
In the 10 years of my investing journey, I have made many mistakes but also learned many lessons from these mistakes. I compiled the 10 most valuable lessons that I have learned and may they help you succeed in your investing journey.
Happy 10 Years Of Investing | 348k (Realised) Profit, 635k (Unrealized) Loss & 10 Lessons Learnt
How I managed to build a 1M investment/ trading portfolio despite coming from humble beginnings.
How A Poor Kid Got To A 1M Investment Portfolio | Tips & Principles Of Building Wealth
I did these 10 side hustles while holding a full-time job, so I share them here so you can be inspired to grow your wealth through a side hustle that you enjoy.
I Did These 10 Side Hustles While Working Full Time | 10 Side Hustle Ideas To Help You Earn An Extra Income
Struggling with inflation and high cost of living? Try these 10 methods to help you save money and accumulate more savings for investments or rainy days.
10 Ways To Save Money To Help You Fight Inflation & Rising Costs Of Living
Why I am building $120,000 of cash reserves in Singapore Savings Bonds (SSB) & 5 reasons why I think SSB is a worthy low or zero-risk investment that you can consider.
Why I Am Building $120,000 Of Cash Reserves In Singapore Savings Bonds (SSB)? | 5 Reasons Why SSB Is A Worthy Low-Risk Investment
