## [# ETF Slop: How Wall Street Flooded the Market With Gimmick Funds](/sections/features/etf-slop-how-wall-street-flooded-market-gimmick-funds)
# ETF Slop: How Wall Street Flooded the Market With Gimmick Funds
Wall Street has launched nearly 700 ETFs this year, but much of the boom is built on gimmicks.
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[By Sumit Roy ](/authors/sumit-roy)
Aug 26, 2025
Edited by: ETF.com Staff
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The generative AI boom has unleashed an endless stream of low-quality content churned out for views and clicks. There’s a word for it now: AI slop.
The ETF world has its own version. Call it ETF slop.
Just as AI slop means endless articles, videos, and posts that are easy to create and empty of substance, ETF slop means endless new tickers that deliver little of lasting value.
So far in 2025, issuers have launched nearly 700 ETFs, already close to last year’s record with four months still left to go. With more than 4,600 ETFs now listed in the U.S., about 15% of the entire market has been born this year alone. And much of it is slop.
## Origins of Slop
A good place to start is the single-stock ETF. The SEC’s 2022 approval of single-stock ETFs opened the floodgates, and much of the surge in launches since then has been in this category.
The first wave were leveraged and inverse funds like the [**Direxion Daily TSLA Bull 2X Shares (TSLL)**](/tsll). Many ETFs tied to popular names like Tesla, Meta, and Nvidia hit the market in 2022. Some caught on, some didn’t.
Since then, the launches have only kept coming, with issuers rolling out new leveraged single-stock ETFs every week. That’s not all that surprising. These products are quick and easy to crank out, they carry far higher fees than the average ETF, and they tap into the constant demand from traders who want juiced exposure to the market’s most popular names.
In theory, you could launch 2x long and short ETFs on every stock in the market. Most would flop because there’s little demand for leveraged exposure to boring companies like Johnson & Johnson or Alcoa. But for high-flyers, there’s plenty of demand. And with new buzzy names constantly capturing investor attention, there’s always room for more of these leveraged and inverse funds.
These ETFs aren’t inherently useless, either. A 2x product on a popular stock can be a legitimate trading tool. They serve the same purpose as the leveraged index and commodity ETFs that have been around for ages, like the [**ProShares UltraPro QQQ (TQQQ)**](/tqqq) and the [**ProShares Ultra Gold (UGL)**](/ugl).
Yes, they can be financially ruinous if the trade goes against you, and plenty of investors still don’t fully understand [risks](https://www.etf.com/sections/features/leveraged-etfs-hidden-costs-eat-your-returns-0) like volatility decay or the financing costs of leverage in today’s higher-rate environment. But they’re generally straightforward. They do what they say they do, and traders often use them as an alternative to margin.
These ETFs may count as slop in the sense that they’re formulaic and unimaginative, but they aren’t useless. Traders know what they’re buying, and the funds generally deliver what they promise.
The real slop showed up in the next wave of single-stock ETFs: the “income” funds.
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## The Yield Game
The most popular flavor of ETF slop today is the so-called income ETF built on systematically selling options. Options-based strategies aren’t new. Covered-call ETFs on broad indexes like the S&P 500 have existed for years. But the single-stock variety is new, and that’s where the slop has multiplied.
YieldMax pioneered it, rolling out single-stock covered-call funds that boast eye-popping headline yields. The [**YieldMax MSTR Option Income Strategy ETF (MSTY)**](/msty), for instance, currently advertises a 91% distribution rate.
“Yields” like that have caused investors to pour a stunning $6.9 billion into the ETF since launch. But the performance has been abysmal. Since debuting in February 2024, MSTY has gained 261% on a total-return basis (distributions plus price change), compared with a 422% gain for MicroStrategy stock itself.
It’s the same story with YieldMax’s first fund, the [**TSLA Option Income Strategy ETF (TSLY)**](/tsly). Since November 2022, it has returned just 28%, compared with a 92% gain for Tesla stock.
But hey—at least it paid “income” the whole way.
## The Sales Pitch
The problem is the way these funds are sold. Issuers plaster giant “yield” numbers across their websites while total returns and risk disclosures are buried in the fine print. The result is a warped picture of what these ETFs actually deliver.
It’s working, though. Communities like the YieldMax subreddit, with more than 70,000 members, celebrate payouts as if they’re free money. What rarely gets mentioned is that investors would have earned far more simply holding the underlying stocks, and in a more tax-efficient way.
Unlike leveraged single-stock ETFs, which at least have clear use cases and environments where they work, these option-selling “income” funds almost always underperform.
Covered-call ETFs give up upside in exchange for option premiums. When the stock runs higher, they miss a lot of the gains. When it falls, the income provides only a thin cushion against losses.
And yet the category keeps expanding. Now there are “income” funds on everything: single stocks from Palantir to Berkshire Hathaway; the Magnificent Seven; Chinese internet stocks; and Bitcoin.
Amplify recently launched the [**SILJ Covered Call ETF (SLJY)**](/sljy), which slaps the strategy on junior silver miners, with a target for 18% annualized option premium income (a modest number in a world where YieldMax brags about 90%).
Some issuers have taken it up a notch. GraniteShares has “YieldBOOST;” Roundhill rolled out “WeeklyPay;” and Defiance has Leveraged Long + Income. Each one layers option-writing on top of leveraged ETFs. As if the standard versions weren’t gimmicky enough.
## Slop Pays
I don’t expect the proliferation of ETF slop to end anytime soon. It’s just too lucrative.
YieldMax has ballooned into an $18 billion issuer on the back of these products. Its 54 ETFs throw off close to $230 million in revenue a year. That’s in the same ballpark as what the fifth-largest ETF issuer, Schwab, makes from its 34 ETFs (except Schwab has 25 times the assets).
Slop pays, and even the biggest issuers want in. In July, State Street launched “premium income” versions of its flagship sector ETFs. Their pitch is that these funds “harness sector trends while enhancing current income and reducing volatility.”
Translation: take an existing fund, slap a covered-call overlay on it, call it income, and quadruple the fee.
## The Price of Slop
From a product perspective, the success of these options-writing funds is unusual. For most of their history, ETFs either gave you cheap, broad exposure or they tried to carve out niches where they could charge more—things like thematic ETFs, smart beta ETFs, or active stock picking ETFs. In all of those cases, performance mattered. If the returns looked good, money flowed in.
These new “income” funds haven’t had to play that game. They sell yield, not performance. Flash a giant number on the website, pump out distributions, and the billions flow in, even if the total returns are lousy.
Don't get me wrong, there’s nothing inherently wrong with selling options, just like there’s nothing inherently wrong with leverage. A 3x Nasdaq ETF like TQQQ is dangerous if misunderstood, but at least it does what it says on the tin. Same with a 2x Tesla fund like TSLL. They’re blunt tools, and traders generally know the risks.
You could design an options strategy that’s more differentiated and upfront about the trade-offs it’s making. That’s generally how I feel about defined-outcome, or buffer, ETFs. They have critics too, but at least they’re transparent about what they do.
Most of these “income” funds don’t bother. They hide behind the word “income.” They promise high yields and safety but deliver capped upside, only a thin cushion against losses, and long-term underperformance.
And just like in the AI world, the flood of slop makes it harder to find the good stuff.
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[ Sumit Roy Senior ETF Analyst ](/authors/sumit-roy)
Sumit Roy is the senior ETF analyst for etf.com and author of (Don't) Invest Like a Pro. He creates a variety of content for the platform, including… [View Bio](/authors/sumit-roy)
Related Topics [Single Stock](http://www.etf.com/topics/single-stock)
[Income](http://www.etf.com/topics/income)