When SpaceX went public at a $1.7 trillion valuation, the largest IPO in history, retail traders didn't just watch from the sidelines. They piled into single-stock ETFs to trade every swing, from a 35% to 40% pop in the first two days to five straight sessions of selling that followed.

That kind of demand is reshaping the leveraged and inverse ETF market.

The category has grown from roughly 2% of total ETF assets to nearly 10% over the past decade, and while net flows were relatively flat in 2025, daily trading volume tells a different story: investors are showing up in force to capture volatility.

Speaking on The ETF Show, Bilal Little, Global ETF Strategist at Direxion, said the shift traces back to how the products were first built.

"You go back to when these products were initially developed, which was basically during the financial crisis," Little said. "They were developed as trading tools really for liquidity, to get expression in the market one way or another."

Assets grew slowly at first, reaching roughly $40 billion between 2010 and 2019 before retracing, until 2020 became what Little calls the catalyst for the growth that followed. Today, the leveraged and inverse universe holds approximately $200 billion in assets across about 600 products, still a sliver of the broader ETF landscape's $15 trillion and 5,500-plus products, but growing fast.

According to Little, two forces are pulling the category forward: single-stock ETFs, and a change in who's actually trading these products.

"It's no longer just an institutional product or tool," he said. "Retail investors today are not just your YOLO trade investors. They're much more sophisticated. They have more access to tools and resources, and they're really focused on both fundamentals and technical trading."

Little said today's retail traders are looking for more than the traditional buy-and-hold playbook. "They want a little more octane," he said, noting investors are trying to make up for lost income and grow faster than the "six or seven percent, set-it-and-forget-it" approach they've long been taught.

Education, not speculation, is what Little says Direxion leans on as its foundation. "Risk isn't bad or good, it just is," he said. "You just need to understand what it is."

SpaceX remains the clearest illustration of where that demand is heading. After surging out of the gate, the stock fell for five consecutive sessions before settling into a trading range between $150 and $160. To meet the demand from traders on both sides of that move, Direxion built $LOFF, the Direxion Daily SpaceX Bull 2X ETF, alongside $QQQE, an equally weighted Nasdaq-100 fund built for investors who want longer-term exposure without the volatility of a single, newly public stock.

"Our levered products are designed for trading, daily trading. They're not designed for buy and hold," Little said. "QQQE would be the hold, because that has a longer-term profile."

That distinction underpins Direxion's broader lineup. $SOXL, its 3x leveraged play on semiconductors, is the firm's largest product at roughly $30 billion, while $TSLA remains its largest single-stock offering.

Looking ahead, Little expects Anthropic and OpenAI to headline the next wave of IPO-driven demand, but flagged one name flying under the radar: the ADR listing for SK Hynix, the world's second-largest memory chip maker, expected within weeks. Direxion's existing $KORU, a triple-leveraged South Korea ETF, has already benefited from investor exposure to the name, a preview, Little said, of the demand a direct U.S. listing could unlock.

Capital is also rotating beneath the surface. Little pointed to Micron, which posted margins above 80% and popped 14% on earnings day, yet still fell short of its previous high near $1,250 and has since settled below $1,150. That pullback, he said, has helped push flows toward healthcare, where Direxion's $PILL, $CURE and $LABU have picked up interest, alongside renewed attention on small caps.

"Healthcare has been trading at a 30% discount to global equities," Little said, adding that the sector remains underrepresented since the pandemic-era selloff even as roughly 11,000 people turn 65 every day. He also flagged precious metals, Bitcoin and energy as themes he believes investors are currently underappreciating.

Direxion may be best known for its leveraged and single-stock lineup, but Little said the firm is actively building out longer-horizon, advisor-friendly products, including income-based solutions, as more financial advisors pick up the ETFs their retail clients are already trading.

"We wanna continue to be the hallmark of high-precision trading tools with our levered suite," he said, "but you're also going to see continued opportunities for long-only product."

Source: Video - The ETF Show - The Evolution of Leveraged & Inverse ETFs