The Short-Volatility Trade Is Back With ETFs Sucking In Billions

All of a sudden, the short-volatility trade is back on Wall Street as billions of dollars pour into options-selling ETFs like never before.

With this year’s stock rally defying recession warnings and aggressive Federal Reserve tightening, investors have been paying up for defensive strategies that offer income along the way. That’s endowed an exotic corner of the exchange-traded fund universe with a record $57 billion of assets.

Among the most popular: Investing styles that go long equities while selling derivatives — wagers that will outperform if the S&P 500 Indextrades sideways or simply falls. In so doing, investors are ...