Retail investors pull $7B from leveraged ETFs in September 2025 after strong gains, with SOXL and TSLL leading withdrawals.
Retail traders are withdrawing money from high-risk leveraged exchange-traded funds (ETFs) after a strong rally in September. Data shows net outflows of around $7 billion this month, marking the largest withdrawal since records began in 2019.
Leveraged ETFs Face Largest Outflow in Years
According to The Kobeissi Letter, leveraged ETFs saw $7 billion in outflows month-to-date, with the semiconductor-focused SOXL leading the withdrawals. SOXL, which tracks semiconductor stocks at three times leverage, lost about $2.4 billion despite gaining 31% in September. This marks the fund’s fifth straight month of outflows and the second-largest exit in four years.
Other leveraged ETFs also experienced large withdrawals. TSLL, a leveraged ETF tied to Tesla stock, recorded $1.5 billion in monthly outflows, its largest on record. These exits suggest that traders are taking profits even though the broader market remains near record highs.
Bloomberg Intelligence noted that these outflows are the biggest since leveraged ETF data began in 2019. This trend reflects a shift among day traders who had fueled rallies earlier this year. Instead of adding new money, they are reducing exposure to riskier positions while stock indexes remain strong.
Market Strength Meets Rising Caution
The S&P 500 slipped 0.3% for the week, its first decline in a month, while the Nasdaq 100 fell 0.5%. Treasury bonds also extended losses, with the iShares 20+ Year Treasury Bond ETF dropping for a second week. While these moves were modest, they show that markets are entering a more cautious phase.
Cryptocurrency markets added pressure, losing about $300 billion in value earlier in the week. Leveraged positions in Bitcoin and Ether were forced to unwind, causing sharp price swings before partial recovery by Friday. This decline reduced some of the gains retail investors had built during the year.
Despite these developments, there are no signs of a widespread downturn. Instead, investors appear to be preparing for potential volatility in the months ahead. Analysts point to possible government shutdown risks, which could delay economic reports and affect investor confidence.
Retail Traders Adjust Strategies as Firms Add Protection
Retail investors, often considered late movers, have been early in adjusting positions this year. They drove much of the buying in the first half of 2025 and added risk when markets briefly dropped in April. Now, their decision to pull back from leveraged ETFs may indicate a shift toward more careful positioning.
Investment firms are also adjusting strategies. Lido Advisors, which manages $30 billion, is adding protective tools while staying invested. The firm is selling covered calls to generate income and buying put spreads for downside protection. “We’re teetering on that fine line, when does bad data become bad for the markets?” said Nils Dillon, the firm’s director of portfolio strategy and alternative investments.
Meanwhile, money is flowing into safer assets such as cash-like funds, gold, and volatility products at the fastest pace in months. These movements show that investors are not leaving markets entirely but are reallocating toward areas seen as more stable.
Source: https://www.livebitcoinnews.com/retail-investors-pull-seven-billion-dollars-from-leveraged-etfs-after-strong-september-rally/
