As the S&P 500 soars to new peaks, traders can't get enough of risky exchange-traded funds (ETFs). Over the past year, interest in complex ETFs has surged, especially those using derivatives to boost returns, protect against market drops, or even hedge against bitcoin declines. This trend mirrors the ETF industry's maturation and success, with investors now seeking out strategies once reserved for the wealthy. While traditional, low-cost index funds remain popular, the push for complex ETFs stems from financial firms needing higher profits. These alternative ETFs, using options and leverage, can fetch fees up to 100 basis points. In 2024 alone, 40% of new U. S. ETFs relied heavily on derivatives, up from 20% a decade ago. Buffers and synthetic income are common strategies, with leveraged ETFs drawing big assets in bull markets. Vanguard founder Jack Bogle might frown on today's ETF landscape, but so far, derivatives haven't caused systemic risks. Still, as ETFs get more complex, experts worry they're straying from their low-cost roots, with social media helping drive demand. With markets high, investors want risk. When markets slip, they'll want protection. It's a whole new game.

Investors Chase Risky ETFs as Markets Hit New Highs

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