Smaller ETF issuers specializing in strategies outside of the mainstream are stepping up. Instead of offering broad ETFs focused mostly on major stocks and fixed income, these issuers target alternatives for investors with niche goals.

Instead of trying to compete with the Vanguards of the world, they've managed to carve out their niche and succeed.

One of those issuers is Defiance. It manages nearly $2 billion in assets by specializing primarily in two themes — leveraged single-stock ETFs and zero days to expiration, or 0DTE, option income strategies. These funds cater to individuals looking to make shorter-term high-conviction trades. And that's a goal that has immensely grown in popularity. The competition is fierce and issuers, including Defiance, are working to capture the attention of investors.

Investors Business Daily caught up with Defiance's CEO and chief investment officer, Sylvia Jablonski, to get her take on the markets, the company's future plans and the launch of the company's new BattleShares ETF suite.

Creating The Best ETFs?

IBD: Give us a little background on Defiance and the ETFs you offer.

Jablonski: Defiance ETFs is an innovative issuer focused on providing thematic, leveraged and options-income-related investment solutions. We are leaders in the single-name leveraged ETF space and have had rapid growth in identifying high-conviction themes like quantum computing, AI and thematic funds, offering investors exposure to emerging trends with unique risk and reward profiles.

IBD: Your ETF lineup is centered around leveraged single-stock ETFs and high-yield 0DTE strategies, two areas growing rapidly. How are investors weaving these products into their portfolios?

Jablonski: The rise of leveraged single-stock ETFs and 0DTE strategies reflects a shift toward more tactical investing. These products allow investors to express high-conviction, short-term views on specific stocks or sectors and hedge existing positions using inverse or short ETFs. These funds are best suited for active traders and investors who understand the risks associated with leverage and derivatives-based products.

For options, these funds (can) enhance portfolio returns through options-based income strategies by generating high levels of income.

Understanding BattleShares ETFs

IBD: You just launched the BattleShares lineup of ETFs. They features long and short strategies where two industry competitors go head-to-head. Tell us about the thought process behind bringing the Tesla vs. Ford ETF (ELON) to market and the BattleShares strategy in general. Why should investors choose ELON over just buying Tesla (TSLA) stock outright?

Jablonski: Investors might prefer ELON over buying Tesla outright because it offers long exposure to Tesla while shorting Ford (F), potentially enhancing returns if Tesla outperforms its legacy competitor. The ETF structure can provide better risk-adjusted exposure to the EV market. And it allows investors to trade an industry pair-trade strategy without manually managing both positions. The fund basically democratizes a well-known and utilized institutional trading strategy for investors.

This ETF is for those who believe in Tesla's dominance over traditional automakers but also want a built-in hedge.

IBD: Tell us what's next for the BattleShares lineup and how many ETFs you have planned using these strategies?

Jablonski: We have many pairs ideas in the hopper spanning various sectors and asset classes.

Going Quantum With The Best ETFs

IBD: You've seen the assets of the Defiance Quantum Computing ETF (QTUM) triple over the past few months to more than $1 billion on the heels of Alphabet's (GOOGL) Willow chip and the AI boom. Where do you think we are right now in the AI cycle?

Jablonski: The AI cycle is in very early innings. Companies are investing in (capital spending), and R&D and will begin to employ AI in their day-to-day operations. The long-term trajectory for things like supercomputing, cloud computing, robotics, data center and quantum computing remains strong.

IBD: Another fund you recently brought to market is the Defiance Large Cap ex-Mag 7 ETF (XMAG). Its launch coincides with the Magnificent Seven fading and tech taking a back seat. Was this fund designed to be a timing play or more that investors were demanding alternatives to the Magnificent Seven-heavy indexes?

Jablonski: These past drawdown days show the value of an XMAG ETF. As those top seven names get impacted the most on pullbacks, XMAG tends to have a lower drawdown.

XMAG was designed as an alternative to tech-heavy benchmarks, recognizing that investors were concerned about overconcentration in the Magnificent Seven. (They are also) looking for diversified large-cap exposure without outsize tech influence and access to (a) market cap weight (of) the next leaders of the rest of the S&P 493. The fund was not purely a timing play, but rather a response to investor demand for diversification beyond the dominant megacap growth stocks. Equal-weight funds are out there, but there weren't funds that rewarded a market cap diversification exposure play on the S&P.

Zero Days To Expiration Funds Catch Interest

IBD: How should investors be treating 0DTE funds in their portfolios? Do you think these should be sliding into the equity or fixed-income sleeves and do you think they can or should be a replacement for dividend stocks or more traditional covered-call strategies?

Jablonski: These are meant to be high-income products. Investors can use them in equity or alternative income sleeves. Some simply use them in their options or dividend strategies.

IBD: Defiance just filed for the MAGA Seven ETF (MAGT), which according to the filing would "provide targeted exposure to companies that appear positioned to benefit from the economic, regulatory and policy environment shaped by the Trump administration and its potential future impact." What are you able to tell us about this fund and how you expect it to work?

Jablonski: Unfortunately, we are in the quiet period. We can only share that we have filed for the fund.

Single-Stock ETFs Provide Options

IBD: Defiance has focused on leveraged single-stock ETFs and now the BattleShares ETF suite. Where is the next big growth frontier for your company?

Jablonski: We will continue to grow and develop in the AI and quantum space, thematic ETFs, more timely single stock ETFs, various options strategies that might not exist and, of course, more BattleShares.

IBD: What is the most underappreciated risk you see in the financial markets today?

Jablonski: Tariffs, the Fed and geopolitics.

IBD: Any other final thoughts on the state of the global economy and financial markets?

Jablonski: The economy remains strong. Macro data is softening, but nowhere near recession territory. Once we get past the headwinds of tariffs uncertainty and get the tailwinds of perhaps corporate and individual tax cuts and deregulation, the market could (resume) its steady climb.

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