Options based ETFs are no longer a niche corner of the market. With well over a thousand funds and assets nearing $400 billion, the category is growing fast as investors hunt for income and some peace of mind. Derivative income funds lead the way, turning market volatility into regular payouts for investors who want more yield than bonds have offered in recent years. Defined outcome funds, which build in a buffer against losses, are growing more slowly in a strong bull market, though newer designs that pair protection with upside exposure are catching on. Even tiny corners, such as autocallable funds, are expanding rapidly from a small base. The trade is familiar: capped upside and full exposure to equity downside for income funds, and limits on gains in exchange for protection for buffer funds. Advisors say clients want to stay invested but with a safety net, which is exactly what this category tries to deliver.

Finsum: Options based ETFs can be useful tools for income and risk management, but their popularity is a reason to read the fine print, since every payout and buffer comes with a tradeoff attached.