financemagnates.com 
Massive growth in ETF options is arguably the most significant recent development in trading behaviour in this market.
Data from Cboe indicates that ETF options' average daily volume was up by more than 31% in the first half of this year compared to the same period in 2025. The most recent data points to even stronger growth, with average daily volume for the year to the end of August just over 35% higher than in the first eight months of last year.
London's trading industry is coming home!
This growth is coming from both retail and institutional investors. Institutional block trading has remained extremely strong, while retail options activity rebounded sharply in Q2. Volume remained heavily concentrated in a handful of underlying assets, with SPY accounting for 42% of ETF options volume.
The implication here is important: investors increasingly trade an ETF through its options market rather than simply buying or selling the ETF. That allows them to express views on factors such as volatility, downside protection, income, short-term directional movements, leveraged exposure, event risk and portfolio hedging.
ETF Investors Don't Just Want to Go Long
Leveraged and inverse ETFs have become a major retail trading vehicle. The number of such products in the US has risen from 28 in 2023 to 486 in 2026, and almost half of the new ETF launches in June were leveraged or inverse single-stock products.
Read the first part of this two-part series: ETFs – That’s Not (Just) a Wrap
These products effectively allow retail investors to trade something resembling an options position without having to trade options directly, and have produced some extraordinary behaviour. For example, leveraged semiconductor ETFs continued attracting billions of dollars even while underlying semiconductor shares were collapsing.
According to data from Morningstar, the most significant leveraged exchange-traded fund focused on chip stocks - Direxion Daily Semiconductor Bull 3X Shares - garnered close to $7 billion in net inflows during July and the first half of August.
The ETF provides triple-leveraged exposure to the NYSE Semiconductor Index, which comprises 30 US chip manufacturers. Although the index experienced a decline of over 20% from its highest point, the fund saw a dramatic drop of 70% from its peak in June to its subsequent low.
Additionally, single-stock leveraged funds that track chipmaker SK Hynix and memory company Sandisk also garnered significant inflows during and following the downturn in chip stocks.
Anshul Gupta, head of derivatives research at Barclays, told the FT that it had noted time and again that there is clear evidence of ‘buy the dip’ in the flows into leveraged ETFs and described buying the dip as being akin to catching a falling knife.
However, there is now evidence of saturation. Average assets in newer leveraged ETFs have fallen sharply, 63 leveraged ETFs have closed in 2026 (versus only three in 2025), and many new products are struggling to reach economically viable asset levels.
Are Funds' Size Shrinking?
Average fund size has also collapsed. Morningstar data cited by Reuters show the average fund size falling from $272.2 million in late 2024 to just $63.3 million. Half of all funds now have less than $7 million in assets, and although single-stock ETFs more than doubled in number to over 400, assets barely increased - a clear sign that supply has grown faster than the pool of investor capital.
June may have been the peak of the launch frenzy, when leveraged/inverse single-stock products represented as much as half of all new ETF launches.
But demand for the biggest products remains very strong. S&P Global estimates leveraged ETF assets at around $200 billion, with trading volumes rising sharply. Its data also show enormous securities lending activity, with the top 10 leveraged ETFs generating more than $113 million in lending revenue during the first half of the year.
There are still aggressive new launches. For example, ProShares launched a 2x SpaceX ETF in June, while several issuers are reportedly preparing leveraged ETFs for Anthropic if/when it lists.
Active ETFs are also changing what gets traded. ETFs are no longer synonymous with passive index tracking - active ETFs are now a huge source of new product and trading activity.
JP Morgan estimates US active ETF assets at around $1.8 trillion, up roughly 80% year-on-year, while active ETFs have accounted for more than 60% of new launches in each of the past six years. In the US, active ETFs now outnumber their passive counterparts.
Bram Kaplan, head of the bank’s Americas equity derivatives strategy, notes that new ETF launches in the US remain robust as providers address new investment themes, offer more granular exposures, expand coverage of the investable universe, broaden the range of structured outcomes and continue migrating actively managed strategies into the ETF wrapper.
Europe is catching up rapidly, though. Morningstar says European active ETF assets have nearly tripled since the end of 2023, with 75 new active ETFs launched during the first half of 2026 alone.
At the end of the first quarter of 2026, assets in Europe-domiciled active ETFs reached €85.6 billion, up from €52.5 billion at the end of 2024 and €78.8 billion at the close of 2025. Despite this rapid growth, active ETFs still account for only around 3.4% of total European ETF assets, compared with roughly 12% in the US.
Equity strategies dominate - representing 71% of assets - while active bond ETFs account for 22%. Allocation, money market and alternative strategies remain comparatively small, and asset growth has been largely driven by flows and concentrated among a narrow group of providers.
These developments matter to traders because active ETFs introduce a much broader set of factor, systematic, thematic, fixed income, options-based and outcome-oriented strategies. This shows that the ETF market is becoming less homogeneous and more like a marketplace of differentiated trading exposures.
