Why Single-Stock ETFs Are Surging: Leverage, Covered Calls, and High-Yield Opportunities

A wave of single-stock ETFs hit Canadian markets this summer, as Harvest Portfolios, Ninepoint Partners, and Purpose Investments each rolled out 10 new leveraged products — expanding this once-niche concept to Canadian equities. All three firms plan to broaden their single-stock ETF lineups further.

A key attraction of these products is their lower per-unit price compared to the underlying shares. For example, Royal Bank of Canada (RBC) shares traded near $200 in early September, while ETFs based on RBC ranged between $10.43 and $12.72.
This lower entry point makes option-writing strategies easier to execute, since options trade in lots of 100 shares — assuming sufficient market liquidity.

Most ETFs track large-cap, blue-chip companies, giving investors added comfort. But the real distinction lies in how managers generate differentiated returns through covered call strategies and modest leverage, while offering tax-efficient income since options premiums are taxed as capital gains.

According to Karl Cheong, EVP and head of ETFs at Ninepoint, “The end result is a smoother, income-oriented return profile with steady distributions and potential downside protection.”
Ninepoint charges a management fee of 0.29%, compared to 0.40% for Harvest and Purpose — and is waiving fees until February 2025.

Harvest, known for equity income funds, entered the space in August 2024 and now offers 31 single-stock ETFs, 10 of which are Canadian. All employ 25% leverage.

Turning Volatility into an “Income Engine”

Purpose Investments pioneered single-stock ETFs in December 2022 with five U.S.-based offerings, growing to 25 total ETFs by August 2025.
Portfolio manager Nick Mersch explained that Purpose aims to “turn volatility into an income-generation engine” through multi-layered option-writing and 25% leverage, typically holding 10–20 covered calls per ETF.

At Harvest, annualized yields generally range from 10% to 40% of NAV, according to senior manager Chris Heakes.
Higher-volatility stocks produce higher yields, such as the Harvest MicroStrategy Enhanced High Income ETF, currently yielding around 45% annually, even though its underlying stock (Strategy Inc.) pays no dividends.

Balancing Leverage and Risk

Cheong said the 25% leverage “doesn’t introduce hedge-fund-level risk” but enhances yield modestly.
Each $100 invested controls roughly $125 in stock, boosting dividends and option premiums.
“In rising markets, leverage amplifies gains; in falling markets, it magnifies losses — and we’re transparent about that trade-off,” he added.

The blend of covered calls and mild leverage works best in sideways markets, where option income cushions returns.
In strong bull markets, however, single-stock ETFs may underperform the underlying shares, since exercised call options cap upside growth.

From Single Stocks to Multi-Stock Portfolios

Because single-stock ETFs lack diversification, issuers have launched wrap-style portfolios to meet investor demand for multi-asset exposure.
Harvest’s Diversified High Income Shares ETF, with $830 million in assets, is its top-selling product, while the Canadian High Income Shares ETF adds exposure to its domestic single-stock lineup.

Ninepoint’s Enhanced Canadian HighShares ETF holds all 10 of its single-stock ETFs, weighted toward the highest yielders, with a 15% cap per holding.
Purpose’s Tech Innovators Yield Shares ETF, launched in February, takes a thematic approach focused on technology-linked single-stock ETFs. The firm plans to roll out more multi-stock yield strategies targeting different income and growth goals.