I can tell you with great certainty that at least some of the biggest institutions that are legally hedge funds do use options. And I consider highly leveraged

I can tell you with great certainty that at least some of the biggest institutions that are legally hedge funds do use options. And I consider highly leveraged derivatives to be non linear (because they are on the downside), which may be an abuse of common parlance. It's going to be fairly difficult to give a source, though.