Single-Stock ETF Inflows Slow as Investors Swipe Left on Option Overlay Funds

There are plenty of fish in the sea, but single-stock investors are getting pickier about which ones they reel in. 

Although the market for these funds has exploded in recent years, growing from 58 funds with a total of $3 billion in assets in 2023 to over 600 funds with $42 billion just three years later, flows into these products are slowing, according to a report from Nasdaq. Encompassing leveraged, inverse and option-overlay strategies, single-stock ETFs have attracted $11 billion so far in 2026, less than half the $23 billion they pulled in last year (though there’s still a quarter to go). The decline is mostly in option-overlay strategies, with leveraged funds continuing to attract most new assets. 

Option-overlay funds, which investors often use to generate income, were heavily marketed in the aftermath of stocks and bonds falling together in 2022, but recent poor performance and more compelling bond and cash yields have lately deterred investors, Morningstar Managing Director Jeffrey Ptak said. “The performance of those products has been middling at best, and I would say a lot of them have just stunk,” he said. “They’re terrible after tax, they return capital like crazy, and so I think that that’s arrested some of the growth they had initially seen.” 

Catch and Release

Retail participation in single-stock ETFs has grown sharply, making up only 15% of flows to these products in 2022 but 52% in 2025. That number has since dropped a bit, to 41% in 2026, with new flows going largely to products tied to market narratives. Most retail assets are concentrated in long leveraged products, and flows to these funds are all about performance, Ptak said. “When those stocks falter and therefore the ETFs tumble, then you then see money flow out,” he said. “The opposite holds when those stocks are doing well, and the ETFs will do especially well, that tends to attract demand.” 

Several funds have seen this play out, he said: 

• The Direxion Daily MU Bull 2X Shares (MUU), which aims to return twice the daily performance of Micron, raked in $2.2 billion from the beginning of the year to the end of June, as Micron’s stock rose more than 200%. It’s since seen $1.4 billion exit, as the company’s stock fell more than 30% from its June high, according to Morningstar Direct data. 
• Similarly, the Tradr 2X Long SNDK Daily ETF (SNXX), which tracks Sandisk, attracted $1.8 billion through June as Sandisk skyrocketed more than 700%, but has since lost $300 million as the stock fell nearly 60% from the end of June.

It’s Lonely at the Top: There are now more than 600 single-stock ETFs, and they’re not all winners. The top 5% of funds attracted almost 60% of this year’s net inflows, and the median single-stock ETF has less than $8 million in AUM, bringing in an estimated $81,000 in annual fee revenue. “Most of these are probably going to be closed because honestly, no one’s buying the 2x Nike [fund] or 2x Colgate or Palmolive,” said Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence. “Those ones just don’t hit the same as Nvidia or Micron.”