At the end of November 2025, there was about $160.5 billion invested in exchange-traded funds and securities (ETFs and ETFs). At that point, fund volumes represented about 8% of total trading activity on US exchanges.
Zoom in on these funds and you’ll notice that about 90% of trading volume comes from active retail traders. These products have served these traders by democratizing access to institutional-like strategies in readily available products.
direction Specializes in providing leveraged ETFs to traders to amplify short-term views, use bullish and bearish funds for both sides of the trade, and trade through rapidly changing markets.
Below, we’ll dive deeper into how active traders have been using leveraged EFTs during recent major market events.
Active traders and leveraged funds during the 2020 coronavirus bear market
If you had to pinpoint the exact moment in history that the current retail investing boom began, it would probably be here. There was a lot of turmoil and volatility in the market to take advantage of, and retail traders did so through leverage.
Trading volume in leveraged ETFs more than quadrupled during the depths of the coronavirus selloff, and retail traders flipped between bull and bear positions in long and short funds*, increasingly moving into inverse ETFs as stock prices fell.
These traders turned bullish at the bottom of the sell-off, a day on which the S&P 500 jumped 9.4%, and traders’ appetite for higher prices was boosted after the benchmark index crept to within 7% of its record high in July.
You would think that traders would feel bolder in their positions as prices move. It turns out that the opposite is true. Active retail traders moved from 3X leveraged funds to lower leverage products as the sell-off progressed.
Active traders and leveraged funds during the 2022 inflation crisis
The 2022 bear market was the mirror image of 2020. Stocks fell in a slow, painful way, and in an inflation-ridden world, few strategies worked (except for tangible assets and trend-following trades).
Leveraged fund sizes surged when the selloff began. Retail traders directed their energy toward long positions, mainly to fight the stock market decline.
From August to November 2022, retail traders added to their short positions on nearly 70% of the days. Even when the stock market bottomed on October 12, 2022, it took retail traders about a month to flip their daily flows from short to long. Similar to the coronavirus decline, retail traders boosted their bets on other assets as stocks approached their lows.
Active traders and leveraged funds during the 2025 release day decline
When the White House announced “liberalization day” tariffs in early 2025, the S&P 500 fell 10.8% in two days – a move reminiscent of the pandemic selloff days.
Leveraged fund activity looked noticeably different at this market event, largely because the space changed radically from 2022 to 2025. Individual equity funds began coming online in mid-2022, and the number of funds available has nearly doubled from the depths of the 2022 crisis.
Retail traders resisted the market decline for almost the entire period of the decline. For 35 consecutive trading days, traders bought long-term funds as the S&P 500 fell 19% — gradually, then suddenly. The first day short positions dominated net flows was April 9, or the best day for the stock market in years.
This may be the next evolution of these funds – a place to express high-conviction contrarian trades.
Who are leveraged funds suitable for?
Leveraged funds may be right for you if:
- You have a view you would like to express over the next day (or days) on events such as earnings, data releases, and news events
- You understand the short-term nature of these products (and the risk of significant losses over a short period of time)
- You have the time and attention to manage these positions frequently in response to changing market conditions and performance
Leveraged volumes have grown at an annual rate of 29% since 2020 – faster than options* and stock market volumes over the same period.
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*Short selling: Short selling is a trading strategy where investors borrow stocks and sell them, hoping that the stock price will fall.
*Options: In finance, an option is a contract that transfers to its owner, the holder, the right, but not the obligation, to buy or sell a specified amount of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option.
An investor should carefully consider the Fund’s investment objective, risks, charges and expenses before investing. The Fund’s prospectus and summary prospectus contain this and other information about Direxion shares. To obtain the Fund’s prospectus and prospectus summary, call 866-476-7523 or visit our website at direxion.com. The Fund’s Prospectus and Summary Prospectus should be read carefully before investing.
Investing in funds involves a high degree of risk.
Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, leveraged and/or inverse ETFs track the price of a single stock rather than an index, negating the benefits of diversification. Leveraged and Inverse ETFs pursue daily leveraged investment objectives, meaning they are riskier than non-leveraged alternatives. They seek daily targets and should not be expected to track the performance of the underlying stock over periods longer than one day. It is not suitable for all investors and should only be used by investors who understand the risks of leverage and who manage their investments effectively. Funds will lose money if the performance of the underlying stock is flat, a rising fund will lose money even if the performance of the underlying stock increases, and a falling fund will lose money even if the performance of the underlying stock decreases, over a period longer than one day. Investing in the Funds is not equivalent to investing directly in the underlying securities.
Direxion Stock Risks – Investing in the Fund involves risks, including possible loss of capital. Each Fund is non-diversified and involves risks associated with the Fund’s concentration of its investments in a particular security, industry, sector or geographic region, which may result in increased volatility. The Fund’s investments in derivatives such as futures and swaps may present risks in addition to the risks associated with investing directly in securities or other investments, including imperfect correlations with underlying investments or other Fund portfolio holdings, high price volatility and unavailability. As a result, the value of an investment in the Fund may change quickly and without notice.
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