The Explosive Growth in Leveraged and Options Trading Post-Pandemic
Let’s start with the big picture. From 2020 through 2025, the compound annual growth rate for daily volumes in leveraged and inverse funds hit a staggering 29%. That’s nearly three times the pace of stock volume growth over the same period. Options weren’t far behind, clocking in at 16% annually. Meanwhile, plain-vanilla stocks grew at about 10% per year. The gap is telling. It suggests that a meaningful portion of market participants aren’t just dipping their toes—they’re diving headfirst into instruments designed for amplified exposure.
Why does this matter? Because these aren’t your grandfather’s investment vehicles. Leveraged funds use derivatives to aim for multiples—often 2x or 3x—of an underlying asset’s daily performance. Inverse versions do the opposite, profiting when things go down. Options, with their inherent leverage through calls and puts, offer similar asymmetry. Together, they’ve become go-to tools for traders looking to capitalize on short-term moves rather than long-term holds.
In my view, this shift reflects a broader evolution in how people approach markets today. Patience seems in shorter supply when headlines can swing sentiment overnight. I’ve noticed friends who once bought and held blue-chips now talk about timing dips with amplified bets. It’s exciting, but it demands discipline most casual participants simply don’t have.
Breaking Down the Numbers: What the Data Really Shows
By 2025, average daily trading volume for leveraged and inverse funds reached around 1.41 billion shares. That’s more than double the previous year’s figure and a whopping 250% jump from 2020 levels. To put that in perspective, it’s not just incremental growth—it’s explosive. Options followed suit, with projections landing at 58 million contracts per day in 2025, up 26% year-over-year and more than double since the pandemic began.
Stocks still dominate in absolute terms, of course. But the relative speed of adoption for these riskier products stands out. Retail traders, who poured into markets during lockdowns, have stuck around and gotten savvier. Many now use these tools not as core holdings but as tactical plays—think satellite positions to juice returns during volatile periods.
- Leveraged fund volumes grew at 29% CAGR (2020-2025)
- Options volumes at 16% CAGR over the same stretch
- Stock volumes lagged at roughly 10% annually
- 2025 saw leveraged fund volumes more than double from 2024
These figures highlight a clear preference for instruments that offer outsized potential. But higher reward almost always comes with higher risk, and that’s something every trader needs to internalize.
Why Retail Traders Are Leading the Charge
The pandemic changed everything about access to markets. Apps became more user-friendly, commission-free trading exploded, and educational content flooded platforms. Suddenly, complex strategies that once required a broker or institutional setup were just a few taps away. Retail participation surged, and it hasn’t really subsided.
Recent analyses suggest that individual investors account for the vast majority—sometimes up to 90%—of activity in certain leveraged products, especially single-stock versions. These allow bets on individual names rather than broad indexes, adding another layer of specificity and, yes, risk. It’s no wonder volumes spiked during turbulent moments, like policy shocks or earnings surprises.
People have gotten really smart about investing and investing in complex vehicles.
– Industry executive
That sentiment rings true. Traders today aren’t just buying dips—they’re leveraging them. After sharp pullbacks, many rotate into bull leveraged funds, riding the rebound. It’s a pattern that repeated throughout 2025 and helped generate strong returns for those who timed it right. But timing is everything, and mistiming can wipe out capital fast.
The Boom in Product Innovation and Availability
2025 stood out as a banner year for new leveraged offerings. The number of active funds jumped by 50%, the biggest annual increase in nearly two decades. Most track equities, but coverage has expanded into sectors, regions, and themes. Lesser-known plays—like those tied to specific international markets—suddenly gained traction when those areas rallied.
This proliferation means more choices, but also more complexity. Not every product behaves the same way, especially over periods longer than a day. Compounding effects can erode returns in volatile sideways markets, something many newcomers learn the hard way. Still, the variety empowers experienced traders to fine-tune exposures in ways that weren’t possible before.
One interesting angle: these aren’t typically huge portfolio allocations. Most users treat them as smaller, opportunistic positions. That makes sense—keeping leverage contained limits downside while still capturing upside during momentum shifts.
Risks and Realities: What Traders Need to Remember
No discussion of leveraged products is complete without addressing the elephant in the room: amplified losses. These funds reset daily, so holding them through choppy periods can lead to decay even if the underlying asset ends flat. Options carry similar pitfalls—time decay, implied volatility shifts, and the potential for total loss of premium.
I’ve always believed education is the best defense. Before jumping in, understand the mechanics. Ask yourself: Can I handle a 3x move against me in a single session? Do I have a clear exit plan? These aren’t rhetorical questions—they’re survival ones in fast markets.
- Research the specific fund or strategy thoroughly
- Limit position size relative to overall portfolio
- Use them tactically, not as core holdings
- Stay disciplined with stop-losses and profit targets
- Never invest money you can’t afford to lose
Following these basics goes a long way toward turning potential pitfalls into managed risks. The goal isn’t to avoid leverage entirely—it’s to use it intelligently.
Market Volatility and the Role of Leveraged Tools
We live in an era of rapid-fire events. Policy announcements, geopolitical tensions, earnings reports—any can trigger sharp moves. Leveraged funds and options let traders express views quickly and with conviction. When markets tank on news, some buy the dip aggressively via bull funds. When rallies look overextended, others hedge or go inverse.
This dynamic played out vividly in 2025. Record volumes occurred during periods of stress, followed by quick reversals that rewarded nimble participants. It’s almost as if the market has trained traders to anticipate snapbacks. Whether that’s sustainable long-term remains an open question, but for now, demand shows no signs of fading.
Perhaps the most intriguing aspect is how this reflects broader societal changes. More people have market access than ever before. Financial literacy has risen dramatically. Yet with great power comes great responsibility—or at least the need for it.
Looking Ahead: Can This Momentum Continue?
Predicting the future is tricky, especially in markets. But several factors suggest leveraged and options activity could stay elevated. Ongoing volatility from macro events, continued retail engagement, and further product innovation all point in that direction. Traders have adapted to using these tools for rebound plays, and that habit seems ingrained now.
That said, regulators watch closely. Concerns about systemic risk or investor protection occasionally surface. Any tightening of rules could temper growth. Still, the underlying driver—empowered individual investors—feels structural rather than cyclical.
For those considering entering this space, my advice is simple: start small, learn constantly, and respect the risks. The rewards can be substantial, but only for those who treat it as a skill rather than a gamble.
The rise of leveraged funds and options trading since the pandemic isn’t just a statistic—it’s a window into how retail investing has matured and, in some ways, become more speculative. Whether you’re a seasoned trader or just curious, understanding this trend helps make sense of today’s market rhythms. Stay sharp out there.
