Single-stock ETFs: Approach with caution
When exchange-traded funds (ETFs) started taking off in Canada more than a decade ago, much of their appeal lay in the way they provided instant, low-cost diversification. For the cost of a stock trade, you got exposure to hundreds or even thousands of stock and/or bond issues.
But a new generation of ETFs proudly offers nothing of the sort. Like Canadian Depositary Receipts (CDRs), single-stock ETFs hold or at least derive their performance from just one underlying stock, often a major U.S. tech brand. In contrast to CDRs, though, this isn’t plain vanilla exposure. Many single-stock ETFs use options strategies, borrowing, or both to amplify income or deliver some form of enhanced return. These aren’t traditional buy-and-hold tools, and they come with real risks, some of which may only show up during volatile market environments.
You’ll want to do your homework before jumping in. These funds may look like familiar tickers wrapped in a convenient package, but their structure and strategy can lead to unpredictable results. Here’s what prospective Canadian investors should know about single-stock ETFs.
The two types of single-stock ETFs
Broadly speaking, Canadian issuers have launched two kinds of single-stock ETFs. One type is built for income-seeking investors. The other is geared toward short-term traders looking to speculate on directional moves in popular U.S. stocks.
The income-focused category is dominated by Harvest ETFs and Purpose Investments. With some minor differences, both providers follow a similar playbook. These ETFs typically apply 25% portfolio leverage and write covered calls on 50% of the portfolio. That means if the ETF holds $100 worth of stock, it borrows an additional $25, similar to using a margin loan. The goal is to increase the total base generating dividends and option income.
Covered calls involve selling the right for someone else to buy the ETF’s shares of a stock at a certain price before a set expiration date. In return, the ETF receives a premium, which it distributes as income. If the underlying stock rallies above the strike price, the ETF forfeits that upside. When only 50% of the position is covered, it leaves the other half exposed to further gains.
Purpose’s YieldShares lineup uses this strategy on a range of well-known U.S. names, including Palantir, Advanced Micro Devices, Coinbase, Broadcom, UnitedHealth, Costco, Netflix, Meta Platforms, Nvidia, Microsoft, Berkshire Hathaway, Tesla, Amazon, Apple, and Alphabet. Harvest’s High Income Equity Shares lineup shares many of the same names, but adds extra ones like MicroStrategy and Eli Lilly.
On the trading-focused side of the market is Longpoint ETFs. This firm offers a lineup of SavvyLong and SavvyShort products, which provide daily two-times (2x) bullish or bearish exposure to single U.S. stocks. These ETFs are designed for tactical use, not income generation. They don’t use covered calls or pay monthly distributions.
Instead, they’re built for traders who want to double down on short-term moves in names like Tesla, Nvidia, Amazon, Alphabet, Apple, and Microsoft. The way these ETFs achieve leverage is also different.
All SavvyLong and SavvyShort funds have received exemptive relief to either borrow cash up to 100% of their net asset value or sell short. They may also use derivatives like futures, forward contracts or total return swaps to hit their daily leverage targets.
Forward contracts and swaps are typically entered into with bank counterparties. In a forward, the ETF agrees to buy or sell a security at a future date for a set price. With a total return swap, the ETF pays a bank a fixed or floating interest rate, and in return receives the performance of the underlying security. These agreements are collateralized, meaning the ETF and the bank both post assets to protect against counterparty default.
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Benefits and risks of single-stock ETFs
ETF issuers highlight a few key benefits when marketing single-stock ETFs. Chief among them is the ability to access advanced strategies, like covered call writing or leverage on a single company, without needing to manage the mechanics yourself.
Take the income-oriented products from Purpose and Harvest. If you’re an investor who wants to generate monthly income by writing covered calls on Apple, you’d typically face hurdles like currency conversion, brokerage fees and the time and expertise needed to select the optimal strike prices and expiration dates.
With Purpose’s YieldShares or Harvest’s High Income Equity Shares, you get a turnkey solution. The ETF handles the option strategy and leverage for you, pays monthly distributions, and only requires that you buy and hold the ETF. Moreover, these ETFs can be owned in registered accounts.
For more active traders looking to play earnings reports or macro catalysts, Longpoint’s SavvyLong and SavvyShort lineups offer a more direct way to express a bullish or bearish view. These ETFs can be held in registered accounts, offering cleaner tax treatment compared to using margin or shorting.
They also avoid the complexities of buying options outright. There’s no need to worry about the “Greeks” that make option positions hard to manage: theta (time decay), delta (sensitivity to the stock’s price), or vega (sensitivity to volatility). You simply get magnified daily exposure to the stock’s directional movement, up or down.
But all of these products come with real trade-offs. For instance, the income-focused ETFs from Purpose and Harvest can underperform the underlying stock, especially after accounting for leverage costs, management fees, and the upside limitations of covered calls.
For instance, while the Berkshire Hathaway Yield Shares Purpose ETF (BRKY) outperformed CIBC’s Berkshire Hathaway CDR between January 2023 and June 2025, it lagged the actual Berkshire Hathaway Class B (BRK.B) stock slightly in total return. Its risk-adjusted returns were also a bit lower. And that’s before considering taxes. Each monthly payout from BRKY is taxable in a non-registered account, which can reduce your after-tax return.
Performance comparison
| Start balance | $10,000 | $10,000 | $10,000 |
|---|---|---|---|
| End balance | $15,710 | $15,138 | $15,726 |
| Annualized return (CAGR) | 19.80% | 18.04% | 19.85% |
| Standard deviation | 16.91% | 16.49% | 16.21% |
| Best year | 30.45% | 25.28% | 27.09% |
| Worst year | 6.04% | 5.73% | 7.17% |
| Maximum drawdown | -11.13% | -9.38% | -8.90% |
| Sharpe ratio | 0.87 | 0.79 | 0.90 |
| Sortino ratio | 1.64 | 1.44 | 1.68 |
Source: Portfolio Visualizer
The Longpoint lineup carries the usual risks tied to daily-reset leveraged ETFs. These products are path-dependent, meaning they’re designed to reflect 2x the daily return, not long-term performance.
Due to the effects of daily compounding, the SavvyLong Tesla ETF (TSLU) will not necessarily return double Tesla’s gains over a month or a year. In fact, even if Tesla ends up flat or slightly positive over time, TSLU could lose value depending on volatility. As the Longpoint prospectus explains:
“For periods longer than a single day, the Double Single Stock ETFs will typically decline in value if the return of the respective common stock is flat. It is even possible that a SavvyLong ETF can decline in value even if the return of the respective common stock is positive over a period longer than a single day, and that a SavvyShort ETF can decline in value even if the return of the respective common stock is negative over a period longer than a single day.”
And yes, a total wipeout of your investment is possible. In bold language, the same prospectus states:
“An investor in a SavvyLong ETF could lose their entire investment within a single day if the market value of the respective common stock declines by 50% or more that day. An investor in a SavvyShort ETF could lose their entire investment within a single day if the market value of the respective common stock increases by 50% or more that day.”
Costs are another drawback. You’re paying for active management, derivative execution, and, in some cases, the cost of borrowing. For example, the Alphabet Yield Shares Purpose ETF (YGOG) has a base management fee of 0.40%, but its total management expense ratio (MER), which includes trading, borrowing, and derivative costs, clocks in at 1.75%.
The Longpoint ETFs are even pricier. TSLU, the leveraged Tesla product, lists a 1.55% management fee. Its MER has yet to be disclosed but will include additional expenses once the fund completes its first fiscal year, and will likely be significantly higher.
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Don’t blame the providers
Personally, I think there’s no blame to be placed on issuers for launching these products. They’re simply meeting investor demand, and the regulators seem to have accepted it.
In the U.S., single-stock ETFs have seen explosive growth, and Canadian firms are just bringing that trend north. The more relevant question is why some investors are choosing these products over traditional diversified portfolios.
Despite decades of advice pushing toward low-cost, globally diversified equity and fixed income portfolios, there will always be a segment of investors drawn to more complexity, more risk, and potentially higher income or short-term returns.
If these ETFs didn’t exist, those same investors would likely turn to margin accounts, options, or futures. In that sense, these funds are just a way to outsource aggressive strategies to a professional manager.
The Harvest and Purpose products, on the one hand, are tailor-made for yield-focused investors who already gravitate toward monthly payouts in the double digits. For this crowd, fees and potential underperformance relative to the underlying stock often take a backseat to steady income.
On the other hand, the Longpoint lineup is a natural evolution for investors already using leveraged ETFs from Global X Canada’s BetaPro suite, but who want more targeted exposure to specific stocks instead of broad sectors or indices.
As for the argument that these ETFs encourage reckless risk-taking, it doesn’t hold much weight for me. Investors intent on boom-or-bust bets already have access to securities that go far beyond these ETFs. Wealthsimple, for example, lets users buy dozens of “altcoins,” including Dogecoin, Fartcoin, and even the official Donald Trump memecoin.
These ETFs are complex, expensive tools designed for experienced investors. If you don’t believe that, here’s what Longpoint’s own prospectus has to say:
“The Double Single Stock ETFs are not suitable for investors who do not intend to actively monitor and manage their investments.”
That says it all. Buyer beware.
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