Covered Call Option ETFs
Generate Cashflow – Monetize Market Movement
Harvest ETFs is a market leader in call option ETFs. These Covered Call ETFs generate cashflows for unitholders from a portfolio of securities with a covered call option writing strategy. Harvest launched its first ETFs in 2016 and has established itself as one of the top option writing firms in Canada. We use an active and flexible call option strategy to build high yield ETFs that pay monthly distributions and still capture the opportunity for market growth. Watch this helpful explainer to learn more.
Total distributions paid by Harvest Income ETFs since ETF inception October 2016 to January 2024
An Active and Flexible Covered Call Strategy
At Harvest ETFs we use an Active & Flexible Covered Call Option Writing Strategy. But what is a call option, and how does an active and flexible call option strategy work?
To learn what a call option is read our interactive guide here.
A key dynamic of call option ETFs is a trade-off between income generation and the portfolio’s exposure to market growth opportunity. Writing options on a higher percentage of the portfolio means it is less exposed to market growth.
Many passively managed call option ETFs write options on the same percentage of their holdings every month.
Harvest ETFs follow an actively managed strategy that provides portfolio managers with flexibility regarding selling call options. In our equity income-based ETFs, we cap call option sales at 33% of holdings, whereas, for our fixed income ETF, we can utilize the full 100% limit rate.
This flexibility allows us to capitalize on higher options premiums during specific market conditions by selling call options on a smaller portion of an ETF’s holdings. In our equity income-based ETFs, this approach retains a larger share of the ETF’s holdings for potential market growth compared to a systematic passively managed covered call ETFs.
In the case of our fixed income ETFs, implementing a covered call options strategy at the 100% write level enables us to generate higher premiums and, consequently, higher income. Simultaneously, it serves to reduce the volatility of the underlying portfolio consisting of US Treasury ETFs.
The active covered call option strategy employed at Harvest stands as an established approach for generating monthly cash flow, backed by a proven track record. Our Covered Call ETFs consistently distribute income monthly. The investment team at Harvest ETFs with over 6 decades of combined investment management experience is at the core, and through rigorous analyses effectively implements and executes this strategy.
Equity Income ETFs
Harvest’s Equity Income ETFs focus on large-cap companies, the leaders of thier industries
CAD/US Treasury ETFs
Harvest fixed income ETFs invest in intermediate to long-duration US Treasury bonds and short-term treasury bills (T-Bills) of the Government of Canada, which are among the safest investments available
The monthly income paid by these ETFs is high – often higher than the rate of inflation
Income generated with covered call options is taxed as capital gains – a lower rate than typical income
Harvest Equity Income ETFs can be held in registered accounts which can be tax efficient as investors save
Why Use Call Option ETF for Income Now?
Markets shift up and down every day but call option ETFs give investors the surety of consistent monthly income. An active and flexible covered call option strategy will also allow investors to capture more upside opportunity in certain market conditions while meeting their income needs.
Example of Harvest ETFs & Their Yields
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For Information Purposes Only.
Commissions, management fees and expenses all may be associated with investing in HARVEST Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account income taxes payable by any securityholder that would have reduced returns. Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated. The information contained herein should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Tax, investment and all other decisions should be made with guidance from a qualified professional. Certain statements included in this communication constitute forward-looking statements, including, but not limited to, those identified by the expressions “expect”, “intend”, “will” and similar expressions to the extent they relate to the Investment Fund. The forward-looking statements are not historical facts but reflect the Fund’s, Harvest and the Manager of the Fund’s current expectations regarding future results or events. These forward looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Although the Fund, Harvest and the Manager of the Fund believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. The Fund, Harvest and the Manager of the Fund undertakes no obligation to update publicly or otherwise revise any forward-looking statement or information whether as a result of new information, future events or other such factors which affect this information, except as required by law.