Utilizing new SEC data enabling us to compute performance of mutual funds’ derivative positions, we study how funds use derivatives and how derivatives contribute to performance. Despite small portfolio weights, derivatives significantly impact funds’ leverage and contribute largely to returns and cross-sectional differences in returns. In contrast to prior research concluding derivatives are used for hedging, we find most active equity derivative using funds buy index derivatives to amplify market exposure. These amplifying funds underperform nonusers, yet receive more flows. To test whether their strategy is designed to outperform in a crisis, we use the COVID-19 pandemic as an exogenous shock to financial markets. During the crisis, amplifying funds failed to outperform nonusers and suffered a double whammy. In the initial outbreak, they still held substantial long positions and were slow to trade short derivatives, so that they experienced similarly large losses to nonusers. By the time they shifted strategy, the market has already started to rebound, and they lost on their short positions.