Issuers Have Launched Over 500 Options-Based ETFs Since 2024

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Just like the menus at the Cheesecake Factory, maybe there are too many options.

In nearly every year since 2021, the number of options-based ETF launches has increased, transforming what were once niche strategies into a category with more than 700 products, according to Morningstar Direct data. The sector includes derivative-income ETFs, which generate income by selling options, as well as defined-outcome ETFs, which use options to provide specified levels of downside protection and upside participation. This surge in new products, though, has advisors questioning whether the market is evolving or simply overcrowded. 

“When you have five good funds, competitors see that and come out with 100 more, and that doesn’t necessarily add more quality,” said Cyrus Amini, CIO at Hyphen Wealth Management. “The danger is always there of getting distracted by the newest, shiniest thing.”

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So Many Options

Options-based ETFs really started turning heads in 2022 with the performance of the JPMorgan Equity Premium Income ETF (JEPI). Its total return fell just over 3% that year, compared with a roughly 20% decline for the S&P 500. Its AUM has since grown from just under $6 billion at the end of 2021 to about $46 billion, according to Morningstar. That acted as a catalyst for many more options ETF launches:

• Just eight derivative-income ETFs hit the market in 2021, but issuers launched 102 in 2025 and roughly 55 so far this year.

• Meanwhile, issuers launched 440 defined-outcome ETFs between 2021 and last month.

Goldman Sachs has also made big moves into the category. The firm completed its acquisition of Innovator ETFs, the creator of buffer funds, in April and announced this month that it would acquire derivative-income ETF shop NEOS Investments for roughly $2.3 billion. Together, the acquisitions will give Goldman more than 220 options-based ETFs.

Amini limits options-based allocations to 5% to 8% of a client’s portfolio. While he prefers pure equity exposure, he sees buffered ETFs as behavioral tools for cautious clients. “It’s like bowling with bumpers,” he said. “If that’s what it takes to get clients appropriate equity exposure, then my job is to facilitate that.” Still, Amini warned against treating options ETFs as a cure-all, particularly because many have not been tested through a sustained market downturn.

Louie Humphries, managing partner at Mindset Wealth Management, uses options strategies but designs them in-house rather than buying off-the-shelf products. That, he said, avoids ETF fees and allows for better tax optimization. “Advisors don’t need to be afraid of these products, but they absolutely need to be concerned with understanding exactly what is under the hood.”

How You Use Them: Other advisors are far more bullish. Stuart Chaussée, managing director at Lido Advisors, works almost exclusively with buffer funds, with 90% of the money he manages for clients allocated to them. “Most of my clients are nearing retirement or already retired, and I do not want to sit through the next inevitable 30% decline in the S&P,” he said.

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