US retail investors fuel surge in leveraged ETF trading, study shows

US retail investors fuel surge in leveraged ETF trading, study shows

FILE PHOTO: The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City · Reuters

Suzanne McGee

Tue, February 24, 2026 at 2:06 PM GMT+9 2 min read

By Suzanne McGee

PROVIDENCE, Rhode Island, Feb 24(Reuters) - Nearly 90% of all the trading in leveraged single-stock ETFs in the U.S. market can be traced to transactions by individual investors, according to a ‌new study co-authored by Direxion, a provider of those ETFs, together with two analytical firms, Vanda ‌Research and The Compound Insights.

The data shows that the proliferation of these exchange-traded vehicles, which allow investors to speculate on short-term moves in an ​underlying stock, has been almost entirely driven by their allure for these retail investors. The study also found that last year trading in the leveraged single-stock ETFs accounted for 8% of total trading on all U.S. exchanges.

“The vast number of launches illustrates the market’s growing reliance on speculation,” said Bryan Armour, an ETF analyst at Morningstar.

According to data from Morningstar Direct, ‌there are now 355 leveraged single-stock ETFs ⁠listed in the United States, all but 80 of which have been launched since January 2025.

“Interest in trading the volatility in markets has grown and competition has grown” among asset ⁠managers eager to tap into the surge in retail trader interest in leveraged products, said Mo Sparks, chief product officer at Direxion. Changes in regulatory guidance on the use of leverage also have made it simpler to roll out such products, he ​added, ​even if that has had some “unintended consequences.”

In recent months, U.S. ​asset managers have pushed repeatedly for the SEC ‌to permit them to offer single-stock leveraged products giving their owners the chance to capture three to five times the upside in the underlying stock in a single day. Just as repeatedly, the SEC has pushed back on those initiatives.

On Friday, Direxion again filed to offer a suite of 20 ETFs tied to single stocks ranging from Nvidia to Palantir that, if approved, would give traders three times the exposure to the move in the underlying stock over ‌a single trading day. Sparks said he is not able to ​discuss pending filings being reviewed by the SEC.

According to the study, ​trading volume of leveraged ETFs, which made their ​U.S. debut in late 2022, has grown at a clip of 29% annually, outpacing the ‌rate of growth in trading of either stocks or ​options.

During the biggest market selloff ​in the last 12 months around the April 2 “Liberation Day” tariffs announcements by President Donald Trump, was their “first litmus test … for retail traders under stress.”

During that period, which culminated in a series of big market ​advances, retail investor trades in leveraged single-stock ‌ETFs accounted at times for up to 40% of all trading activity in U.S. markets, the ​study concluded.

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“It’ll be interesting to see how single-stock funds are utilized in future selloffs,” the report ​concluded.

(Suzanne McGee in Providence, Rhode Island; Editing by Lincoln Feast.)

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