Most individual investors and financial advisors stick to exchange traded funds that take long positions in the market and don’t employ leverage.
However, inverse and leveraged ETFs are often used by traders, and these volatile products generate their fair share of trading volume.
At the end of February, there was about $1.2 trillion in U.S.-listed exchange traded funds and notes, with the vast majority of assets concentrated in long funds. Leveraged and inverse funds accounted for about $33 billion, according to data from the ETF Industry Association.
Leveraged ETFs allow investors to magnify returns by 200% or 300%, usually on a daily basis, while inverse ETFs let traders speculate on market pullbacks and hedge.