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(Bloomberg) — The sudden collapse of Silicon Valley Bank and the ensuing fears about system-wide contagion has ignited a $54 billion corner of the exchange-traded fund universe.

Bank ETFs have been at the epicenter of the action over the past week, a stretch which has seen three US banks fail with little warning. Trading volume and options activity has soared across the category, catapulting typically niche sector vehicles into some of the most heavily traded ETFs. 

That surge in volume highlights an often touted key feature of ETFs: their usefulness as trading tools. ETFs, which track a basket of securities and tend to be highly liquid, often see activity spike in tumultuous times given that they can be easily traded, allowing investors to quickly shift exposures.

“Through the regional bank selloff over the last few days, regional bank ETFs have become a risk transfer venue for exposure to the space,” Citigroup Inc. strategists including Scott Chronert wrote in a report. “The largest regional bank ETF has seen a surge in options activity, both calls and puts, becoming a battleground to express long/short views and trade volatility in the space.”

The $2 billion SPDR S&P Regional Banking ETF (ticker KRE), the largest fund focused on regional lenders, has played a starring role. KRE trading volume hit a record $4.9 billion on Friday, followed by another $4.2 billion traded on Monday, ranking it among the day’s 10 most-traded ETFs. That compares to average trading volume of about $486 million over the past five years.

While most of the concern has been centered on regional banks, broader bank-tracking funds have also seen an uptick. The $29 billion Financial Select Sector SPDR Fund (XLF), the sector’s largest ETF, saw roughly $5.5 billion worth of shares change hands on Friday — the most since January. Friday’s trading volume in the $1.2 billion SPDR S&P Bank ETF (KBE) totaled roughly $666 million, the most since 2008.

The volatility has also sparked the options market. Combined put and call open interest in KRE has rocketed to a record as investors look to both hedge and make directional bets on the future of regional banks, according to Bloomberg Intelligence.

“Bank-sector ETFs this month have more than doubled their previous record for trading volume in a single day — twice,” Bloomberg Intelligence ETF analysts James Seyffart and Rebecca Sin wrote in a report. “KRE has an estimated $8 billion in options open interest exposure, almost 4x its assets, adding to its Swiss army knife-like appeal for traders and institutions.”

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