This widely used investment strategy is assisting investors in controlling their risk exposure.

Some experts view the use of options overlays in exchange-traded funds as a significant advantage.

Tony Rochte, the global head of ETFs at Morgan Stanley, recommends using hedging strategies such as options to mitigate significant losses by taking a bet against a fund's equity position.

While they may have limitations on potential gains, they are also taking measures to protect against losses, which is encouraging more people to invest in the broad equity market," he said on CNBC's "ETF Edge.

Alison Doyle, Nasdaq's head of ETP listings, states that the risk management strategy is increasingly preferred by investors.

In 2023, over 75% of ETF launches were active, with portfolios that have options-embedded strategies being particularly noteworthy within the active ETF space. Out of the 75% of ETFs launched in 2023, 70% were either active equity or equity derivative strategies.

As a result, more investors are moving their funds from popular fixed-income products to risk assets, according to Morgan Stanley's Rochte.

Some clients are looking to re-risk their portfolio by watching the equity market rise. They want to exit their 5% CD or 5% money market account and are using options-based strategies on the Nasdaq and other exchanges to do so.

Doyle of Nasdaq highlighted covered call ETFs as a popular way for investors to capitalize on the strength of Big Tech.

Some managers are licensing the Nasdaq-100 index to provide tech exposure with options strategies.