Since Liberation Day, the market has made many moves in both directions. While many investors have focused on hedging volatility, a handful of investors have used this is as opportunity to take advantage of any directional movement — whether up or down — by using leveraged ETFs. In fact, over the past month, some of the most popular ETFs have been leveraged ETFs (particularly those in the already volatile disruptive technology space). While often see as higher risk investments, these ETFs have the potential to enhance portfolio return when used correctly.
Leveraged ETFs are attractive during market volatility
According to Bloomberg data, 379 out of 4,189 funds (9%) are leveraged funds (including inverse funds). Leveraged ETFs have evolved from simple inverse ETFs on broad equities to targeting specific sector, commodities, and fixed income. And recently, these have evolved even further to play on the volatility of risk assets. Many new launches in the space now target cryptocurrencies and single stocks. Over the past few years, these strategies (both old and new) have continued to attract interest from both traders and retail investors.
Leveraged ETFs typically track the daily price movement of a target investment using derivatives. If that investment is up, leveraged products could provide amplified returns—for example, 2x or 3x that. Certain types of leveraged ETFs—inverse ETFs—can profit off a downward movement (and also amplify it). This becomes an attractive strategy in a volatile market where wild price swings in both directions are common. This means that they are used to express short-term views. These are portfolio enhancers and generally not a part of a core strategy.
These are specific (hypothetical) examples of how traders and investors can use leveraged ETFs:
- The market is down “today” due to some market news. Tomorrow, you expect prices to bounce back up. You buy a 3x leveraged ETF on the S&P 500.
- Apple’s earnings report is coming out “tomorrow.” You think the market will respond positively to its fiscal year outlook. You buy a 3x ETF to profit on its earnings bump.
- The semiconductors industry has been down and you expect it to continue to decline tomorrow due to new tariff policies. You buy an inverse ETF to potentially profit off the downward price movement.
Leveraged ETFs pair well with disruptive tech strategies.
While leveraged ETFs are used across a broad range of different strategies, they tend to pair well with disruptive tech strategies which often exhibit wider price swings. Two leveraged ETFs in this space — SOXL and TQQQ — have some of the highest net inflows in April. The Direxion Daily Semiconductors Bull 3x Shares (SOXL ) has seen $4.7 billion inflows over the past month. This ETF targets daily investment results of 300% the performance of the NYSE Semiconductor Index. (If that sounds familiar, the iShares Semiconductor ETF (SOXX ) also tracks this index.) The ProShares UltraPro QQQ (TQQQ ), which saw almost $3 billion in inflows, seeks 300% the daily performance of the Nasdaq-100 Index.
Both semiconductors and the broader disruptive technology space have received a lot of attention from analysts and investors in recent years. The push toward digitalization, combined with artificial intelligence themes have caused this space to become a long-term favorite. The current market uncertainty is causing a broad pullback, however, and growth assets have suffered. Some investors are betting that these sectors — with longstanding strength — will rebound sharply after each daily pullback.
Single-stock ETFs take leverage one step further
There has recently been a new era of leveraged ETFs with single-stock ETFs. While these were first launched in 2022, launches accelerated in 2024 and 2025. These ETFs target heavily traded stocks—mostly disruptive tech names. There are around 115 leveraged single stock ETFs (which is almost 1/3 of all leveraged ETFs). Currently, these ETFs target 47 stocks. 25 of these (over 50%) are technology stocks. Many of the remaining stocks are tech adjacent including Tesla (TSLA), Amazon (AMZN), and Coinbase (COIN). Tesla has the most ETFs (11) based on its stock, followed by Nvidia (10).
Crypto and leveraged ETFs also go hand in hand
Crypto ETF launches accelerated just in time for the leveraged ETF boom. The SEC approval process allowed futures products to launch prior to spot ETFs, which meant that inverse bitcoin — the ProShares Short Bitcoin ETF (BITI ) — and 2x levered bitcoin — the 2x Bitcoin Strategy ETF (BITX ) debuted in 2022 and 2023, respectively. Bitcoin (and other cryptocurrencies) are known for volatility. These ETFs help investors capture that volatility and turn it into returns. Recently, leveraged Solana and XRP ETFs were launched relatively quietly among tariff noise: the 2x Solana ETF (SOLT) and the Teucrium 2x Long Daily XRP ETF (XXRP). Despite the relatively quiet launch, the two have received around $10 billion and $23 billion, respectively, in net inflows over the past month.
Final thoughts:
Leveraged ETFs come with risks. Obviously, the biggest disadvantage is that no one can accurately time the market, so these strategies tend to come with large potential losses. And in most cases, these ETFs are only meant to be held for one day, which means that they need to be managed closely. For longer holding periods, the price will deviate from the target investment, and losses may be greater than expected. Finally, fees are high. The average fee for a leveraged ETF is around 100 basis points (compared to many broad equity ETFs that are less than 10 basis points).
Knowing these risks, investors still have a large slate of leveraged ETFs of various strategies to choose from including the newer generation of leveraged cryptocurrency and leveraged single-stock ETFs. Large issuers like ProShares and Direxion have been trusted names in the space for years and have the scale and experience managing these complex derivative products. Newer leaders like GraniteShares have also emerged in the single-stock ETF space and have built a significant share of assets.
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