Deleveraging is one of the biggest themes so far in 2008, but traders in exchange-traded funds seem to be defying that trend. Five of the 20 most popular ETFs in June were of the leveraged variety.

But to their credit, the ETF set showed a distinct attraction to "short" leveraged funds that move opposite the market at exaggerated amplitudes during the month just ended. Most "long" investors, on the other hand, would have been happy if June had never happened.

In the accompanying table of the 20 most popular ETFs in June, as measured by average daily dollar volume of trading, seven funds bucked the tide of selling. Three were "Ultra Short" entries from ProShares that move opposite the market at accelerated velocities. They were kept company in the plus column by three energy ETFs and a gold fund.

Less fortunate were a pair of ProShares "long" leveraged funds, the

ProShares Ultra QQQ

(QLD) - Get Report


ProShares Ultra Financials

(UYG) - Get Report

. The pair aptly demonstrated the downside of leverage, as the QLD suffered a setback of 18.92% for the month, almost double the loss of its unleveraged counterpart, the

PowerShares QQQ


, which retreated 9.64%.

Even more dramatic, while the credit crunch hammered the unleveraged

Financial Select Sector SPDR

(XLE) - Get Report

to a loss of 17.44% in June, the leveraged ProShares Ultra Financials crumbled at nearly double that rate, losing 31.71% for the month. It's off 51.17% for the first half of the year.

On the other side of the subprime-inspired financial mess, someone prescient enough to be in the

ProShares Ultra Short Financial

(SKF) - Get Report

was ahead 42.01% in June and up 57.28% year to date. The action in SKF attracted enough attention from ETF traders to move it up nine positions in the rankings, from 16th in May all the way to the seventh spot on the list.

Ironically, despite its cascading price, ProShares Ultra Financials climbed eight positions in the daily average dollar turnover rankings, moving from 26th position in May to 18th in June.

While UYG moved up into the top 20 most popular ETFs for June,

ProShares Ultra Short Oil & Gas

(DUG) - Get Report

fell off the top-20 list, retreating from 19th most popular ETF in May to the 22nd spot in June.

The fifth-most-popular ETF, the

Energy Select Sector SPDR

(XLE) - Get Report

, advanced 3.16% in June, the inverse-leveraged DUG moved lower by 7.12%.

As has been the case since the earliest days of ETFs, the


(SPY) - Get Report

remained the most popular of that breed, the only one to generate average daily turnover exceeding $10 billion.

Richard Widows is a senior financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.