By Christine Idzelis
New leveraged and inverse ETFs linked to Sk Hynix are expected next week
The boom in leveraged ETFs is injecting more volatility into the stock market.
Some on Wall Street are growing increasingly concerned that leveraged ETFs are becoming more of a force in markets – potentially amplifying volatility in key corners of the stock market, like trendy semiconductor names.
But that hasn’t stopped fund managers from launching new products at an increasingly rapid clip.
Leveraged and inverse ETFs made up 31% of all U.S.-listed ETF launches in the first half of 2026, up from 22% in all of 2025, according to research from Morningstar. The number of leveraged ETF launches in particular surged in June to 117, comprising almost half the total 239 exchange-traded funds launched that month in the U.S., according to data provided by Morningstar.
Leveraged ETFs linked to SpaceX (SPCX) that launched after its record initial public offering were among the most highly anticipated that began trading in June. Others keep on coming, with leveraged ETFs linked to BlackBerry (BB) – a company now seen as benefiting from opportunities in artificial intelligence, but in 2021 had gained popularity as a meme stock – and technology business Everpure (P) both launched by GraniteShares just this week.
But some say traders who gravitate toward these products see big swings in the underlying stocks as a feature, not a bug.
“Clients in this realm want volatility,” Matt Lamb, a portfolio consultant for GraniteShares, said of leveraged ETFs in a phone interview with MarketWatch. Amplifying volatility means potentially “high upside” for investors, he said, although the pain of a bad bet would be magnified as well.
The firm expects to launch on Monday a leveraged ETF for traders desiring bullish bets on South Korean semiconductor company SK Hynix, as well as an inverse ETF for investors seeking to profit from a potential decline in its shares on a given day, said Lamb. SK Hynix has surged more than 235% this year as of Thursday afternoon, with the highly volatile stock seeing large daily swings in its home market, South Korea.
The GraniteShares 2x Long SK Hynix Daily ETF – which will trade under the ticker SKUU – will aim to double daily swings in SK Hynix’s planned American depositary receipts; and the GraniteShares 2x Short SK Hynix Daily ETF (SKDD) would deliver minus-200% of the daily move in the company’s ADR’s, as the ETF is designed to produce gains as the stock falls, according to the prospectus for the funds.
Semiconductor stocks – an area of the market that’s already volatile after their tremendous surge this year amid the race to build out AI infrastructure – have been one hot spot for leveraged ETFs.
For example, the Roundhill Memory ETF DRAM, whose top holdings include shares of memory-chip companies South Korea’s Samsung Electronics (KR:005930), Micron Technology (MU) in the U.S. and Sk Hynix’s South Korean shares (KR:000660), has skyrocketed since its April launch. There is already a levered version for traders looking to make bullish bets.
Leveraged ETFs are meant to be short-term trading tools. Those who hold them for longer periods risk seeing gains erode – which can happen quickly.
Take the Roundhill T-REX 2X Long DRAM Daily Target ETF RAM, which seeks 200% of the daily performance of the Roundhill Memory ETF. The leveraged ETF surged 20.7% the day after its late June launch. But it has tumbled almost 33% so far in July, compared with a 16% drop for the Roundhill Memory ETF over the same stretch this month through Wednesday, FactSet data show.
Todd Sohn, chief ETF strategist at Baird Strategas, said in a research note this week that the number of leveraged exchange-traded products listed in the U.S. now totals almost 700 across about $200 billion of assets under management. That includes more than 400 levered single-stock ETFs.
While the boom in leveraged ETFs has featured a rise in funds targeting single stocks, exchange-traded funds that seek to provide juiced-up bets on the technology-heavy Nasdaq 100 index NDX capture the largest portion of assets in the category, according to Sohn.
Check out: The Nasdaq-100 has been far more volatile than the S&P 500. Now add SpaceX to the mix.
The ProShares UltraPro QQQ TQQQ, a leveraged ETF that seeks to provide three times the daily performance of the Nasdaq-100 Index, saw some big swings last month. For instance, the ETF jumped almost 10% on June 11 and plunged more than 14% on June 5.
Sohn highlighted the large portion of leveraged ETF assets tied to tech-related stocks and the S&P 500 SPX in the chart below.
Leveraged ETFs may be “toxic” in the sense that the mechanics behind them exacerbate swings up or down in the market, Stefano Pascale, head of U.S. equity derivatives research at Barclays, said in a phone interview. While that increased market volatility is “the key concern,” Pascale said that, in his view, leveraged ETFs don’t pose “a systemic risk” in the U.S. that could trigger a dramatic drop in the S&P 500.
Leveraged ETFs, which use derivatives to amplify returns, “account for upwards of 15%-20% of volume on a given day” despite making up just 2% of assets in the exchange-traded fund industry, Sohn said in his note.
When considering issuing leveraged ETFs, GraniteShares is looking in part for stocks expected to have enduring interest for investors, according to Lamb. Although Canadian software company BlackBerry was once considered “a meme stock,” he said. Now, it’s “an AI play.”
Shares of BlackBerry (BB), which trades under the ticker BB, have soared 193% this year through Wednesday, according to FactSet data.
On July 7, GraniteShares launched the GraniteShares 2x Long BB Daily ETF BBUL and the GraniteShares 2x Long P Daily ETF PUL, which aim for 2 times the daily percentage change of Everpure’s common stock.
Daniel Sotiroff, Morningstar’s associate director of ETF and passive-strategies research, said that leveraged ETFs may entice individual investors to gamble and that they’ll end up with big losses if their bets go the wrong way.
“Individuals should just avoid them,” he said. “They’re highly speculative.”
Mark Hackett, chief market strategist at Nationwide, told MarketWatch by phone that leveraged ETFs are not inherently bad when considering that institutional investors may use them as hedging tools to manage risk in their broader portfolios. But individuals who use them to make aggressive speculative bets in hopes of maximizing gains risk a painful experience, he warned.
“When you’re pulling rubber bands as hard as you’re pulling them” with levered ETFs, or other use of leverage to speculate, “things can get very ugly,” he said.
-Christine Idzelis
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07-09-26 1352ET
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