22 October 2025

At The Money: How Big Can Active ETFS Get?

1Frameworks

9Insights

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 2

Myth Buster08:48

Why Many “Active” Derivative ETFs Are Mostly Mechanical

Leveraged and options ETFs are commonly classified as actively managed because people must execute and maintain swaps or rolling options positions. Nodig calls them active in name only because models generally dictate the trades rather than a portfolio manager making discretionary security selections.

Leveraged ETFs require recurring swap transactions
Options positions continually reprice and expire
Operational decisions prevent complete index automation
Models usually determine the required trades
Trading desks and counterparties create legitimate additional costs

“I refer to them as inos like active and name only”
Dave Nodig · 09:38

“There's some guy generally j PASTTLI title, sitting on a desk somewhere pushing a button to say, yes, we want those options because the model…”
Dave Nodig · 09:41

#derivatives#leveraged etfs#options#fund operations

Myth Buster15:33

Why T+0 Settlement Is Not Automatically Better

Instant settlement can reduce delay and counterparty uncertainty, but Nodig warns that delay sometimes provides valuable recourse. Large transactions and erroneous trades benefit from inspections, escrow, contracts, and other safeguards that deliberately slow completion.

Tokenization could technically support instant settlement
Faster completion can eliminate opportunities to reverse errors
Housing transactions demonstrate the value of deliberate checks
Flash-crash trades show why market participants may need recourse
Speed-bump markets challenge the assumption that maximum speed is optimal

“the bigger and more interesting a transaction gets, the less T zero is actually a good right.”
Dave Nodig · 15:54

“I like knowing that I've got somebody I can call when something goes wrong.”
Dave Nodig · 16:39

#settlement#market structure#tokenization#risk controls

Hot Take· 2

Hot Take07:18

Some Illiquid Strategies Simply Do Not Belong in ETFs

Nodig argues that strategies dependent on obscure, illiquid, or market-moving securities are structurally mismatched with open-ended ETFs. Because an ETF cannot easily close to new money, substantial asset growth or redemptions can overwhelm a niche strategy better housed in a closed-end or interval fund.

Disclosure is especially problematic when trades move the underlying market
Small and illiquid positions may not scale to a multibillion-dollar ETF
Open-ended ETFs cannot easily close to additional investment
Closed-end and interval funds can impose more appropriate liquidity constraints
The product structure should match the liquidity of the investment strategy

“then that strategy probably doesn't belong in an ETF because you've got bigger problems, right.”
Dave Nodig · 07:24

“you do not belong in the ETF.”
Dave Nodig · 07:58

#liquidity#fund structure#closed-end funds#market impact

Hot Take10:30

Private-Credit ETFs Have Not Faced Their Real Liquidity Test

Private-credit ETFs are beginning to combine nonpublic loans with daily trading. Nodig acknowledges that issuers have designed mechanisms for redemptions but remains unconvinced about how they will behave during a credit shock or a rapid investor exit.

State Street's PRIV includes Apollo private credit
The loans can offer moderately higher yields than public corporate debt
Private assets lack continuous public-market pricing
Large redemptions could force difficult liquidity decisions
The structure remains largely untested in severe markets

“We're not going to really know how they're going to perform when the markets go hinky, right”
Dave Nodig · 11:16

“the private securities in the daily liquid vehicle has not really been through the ring aer yet, so I remain very skeptical.”
Dave Nodig · 12:08

#private credit#liquidity#redemptions#credit risk

Explainer· 5

Explainer01:19

Why Superstar Managers Are Fueling the Active ETF Boom

Dave Nodig traces active ETFs from Cathie Wood's highly visible management style to newer products associated with Dan Ives and Tom Lee. Their appeal comes partly from managers publicly explaining individual holdings, creating a sense of authenticity and accountability that passive funds cannot offer.

Active ETFs emerged from an industry historically associated with cheap indexes
Cathie Wood helped revive the public superstar-manager model
Dan Ives and Tom Lee have attracted billions into branded strategies
Public explanations of holdings strengthen investor engagement
Recent outperformance has amplified manager appeal

“There's a level of authenticity to that that I think is really a pretty I also think the fact that they've doubled D, S and…”
Dave Nodig · 02:57

“active managers categorically underperform over time.”
Dave Nodig · 04:42

#active etfs#fund managers#investor behavior#performance

Explainer05:53

How Semi-Transparent ETFs Protect a Manager's Trading Intentions

Semi-transparent ETFs disclose enough information for market makers to trade the fund without revealing the entire portfolio every day. The structure can protect managers who accumulate positions over time, although Nodig argues that reduced visibility offers little direct benefit to individual investors.

Some active managers do not want to disclose daily trades
Semi-transparent structures provide market makers with partial information
Delayed disclosure may reduce front-running of gradual position building
The structure primarily solves an asset-manager problem
Investors generally benefit from knowing more about their holdings

“They're telling you once in a while, and they're giving the street just enough information to make a good market not knowing all the information.”
Dave Nodig · 06:11

“I've never heard an individual investor say, golly, I wish I knew less about what I owned.”
Dave Nodig · 06:30

#transparency#active etfs#market makers#disclosure

Explainer12:47

Crypto ETFs Could Unlock Institutional Multi-Coin Portfolios

As regulators permit ETFs for more major crypto assets, ordinary brokerage investors will gain access to a wider set of portfolio building blocks. Nodig expects established firms to use those single-asset products as ingredients for more institutional active and indexed crypto strategies.

Major crypto assets may each gain an ETF sleeve
Brokerage investors will not need separate crypto infrastructure
Single-asset products enable diversified crypto portfolios
Top-coin indexes become practical once investable targets exist
Institutional active crypto products may follow

“Having those building blocks is awesome also because it will now allow portfolio managers to create portfolios of those individual securities, which right now you…”
Dave Nodig · 13:09

“I suspect you'll see firms like Bitwise and black Rock, who've got some real bona fides in the crypto management space start bringing pretty institutional…”
Dave Nodig · 13:28

#crypto etfs#portfolio construction#digital assets#regulation

Explainer13:44

Tokenized Stocks Will Likely Start as Wrapped Securities

Nodig expects securities ownership eventually to move through transferable tokens rather than only through exchange-led ledger entries. Because directly tokenizing equities requires legal change, the nearer-term version will likely be wrapped tokens backed by securities held in a trust pool.

Tokens could directly represent ownership of conventional securities
Investors could transfer assets between wallets without an exchange handling settlement
Centralized exchanges would still aid price discovery
Direct equity tokenization requires legislation
Wrapped securities are a likely transitional structure

“You'll be able to put it in a wallet and say, oh, no, this is worth one hundred shares of Apple”
Dave Nodig · 14:09

“So be skeptical when people say we're tokenizing everything because it's going to be a decade.”
Dave Nodig · 15:02

#tokenization#securities#blockchain#settlement

Explainer16:54

How High-Yield ETFs Launder Volatility Into Distributions

Nodig uses “volatility laundering” to describe products that transform a volatile underlying position into an apparently attractive stream of distributions. Synthetic exposure, covered calls, and return of capital can change the presentation of risk without removing the possibility that the underlying asset collapses.

The strategy shifts volatility rather than eliminating it
Synthetic positions can replicate ownership of a volatile asset
Covered calls sell volatility to other market participants
Return of capital may be included in distributions
Investors retain severe downside exposure to the underlying asset

“volatility laundering is simply moving volatility from one bucket to another and charging something for the privilege of doing that.”
Dave Nodig · 16:54

“you're still exposed to MicroStrategy collapsing and going to nothing.”
Dave Nodig · 17:49

#volatility#options#income etfs#risk