At the end of November 2025, leveraged exchange-traded funds (ETFs) and notes (ETNs) saw approximately $160.5 billion in investments, representing about 8% of total trading activity on U.S. stock exchanges. Notably, around 90% of this turnover is driven by active retail traders, who have increasingly utilized these products to access institutional-like strategies. Direxion, a key player in this space, offers leveraged ETFs that allow traders to capitalize on short-term market movements.
The performance of leveraged funds has varied significantly across market events. During the COVID bear market in 2020, retail traders leveraged these funds to capitalize on volatility, quadrupling turnover as they flipped between long and short positions. In contrast, the 2022 inflation crisis saw traders struggle to find effective strategies, yet leveraged fund volumes surged as they attempted to navigate a slow market decline. The recent “Liberation Day” drop in early 2025 illustrated a shift, with traders maintaining long positions even amid significant market declines.
For market professionals, the rapid growth of leveraged fund volumes—29% annually since 2020—highlights the evolving landscape of retail trading. Understanding these trends is crucial, as they indicate a potential shift towards more contrarian strategies among retail investors in response to market volatility.
Source: benzinga.com