Increased demand for leveraged and inverse ETFs due to market volatility

From CNBC: 2025-02-27 07:40:58

Market volatility is fueling demand for leveraged and inverse ETFs, according to Direxion CEO Douglas Yones. Investors can make big bets on the market’s direction by going long or short with these ETFs, neutralizing their exposure.

Yones’ firm manages the Direxion Daily Semiconductor Bull 3X Shares (SOXL) ETF, with top holdings in Broadcom, Nvidia, and Qualcomm. Despite being up almost 84% over two years, the ETF has seen a 36% drop in the past year and over 16% in the past week.

With market-moving headlines occurring frequently, Yones predicts that volatility will continue to rise throughout the year. Todd Rosenbluth of VettaFi also anticipates growing demand for single-stock leveraged ETFs, offering investors the benefits of both risk-on and risk-off exposure in one stock with the liquidity of an ETF wrapper.

Read more: Market volatility creating buzz for these two types of ETFs