A growing number of young Canadian investors are turning to covered-call exchange-traded funds (ETFs) as a strategy to generate stable income amid market volatility and financial uncertainties. This trend marks a shift toward income-focused investing among a demographic traditionally associated with long-term capital appreciation.

Jordan Collier, a 36-year-old pipefitter from South Surrey, British Columbia, embodies this shift. After beginning his investment journey in 2020, inspired by Benjamin Graham’s value investing principles, Collier transitioned toward covered-call ETFs in 2022. He values the monthly income these funds provide, which he describes as more consistent than relying solely on capital gains. By 2023, he had dedicated his entire portfolio to such ETFs and launched a YouTube channel advocating the strategy, which has attracted over 10,000 subscribers.

Covered-call ETFs generate income by selling call options on their underlying securities. These options give buyers the right to purchase the asset at a predetermined price within a set timeframe. If the asset price remains below this strike price at expiration, the options expire worthless, allowing the ETF to keep both the asset and the premium income. This approach can mitigate losses during market downturns, though it may restrict upside gains if the underlying asset’s price surpasses the strike price. The income derived from option premiums is considered tax-efficient in Canada, typically treated as capital gains.

The popularity of covered-call ETFs in Canada has surged in recent years. According to TD Securities, assets under management in this category grew from $3.7 billion in 2016 to $57 billion in 2026, rendering it one of the fastest-expanding segments within the country’s $1-trillion ETF market. Research by the Canadian ETF Association indicates that 26% of Canadians aged 18 to 34 currently own ETFs, the highest ownership rate among all age groups, with almost half expressing interest in dividend- or income-focused funds.

Canadian investors’ preference for income is also reflected in the structure of domestic single-stock ETFs, which predominantly employ covered-call strategies. In contrast to the United States—where single-stock ETFs often utilize leverage and complex strategies to amplify potential returns and risks—approximately 98% of Canadian single-stock ETFs use covered calls. Nick Piquard, chief options strategist at Hamilton ETFs, attributes this difference to a generally more conservative Canadian investor mindset that prioritizes income generation over higher risk.

This income focus extends even to alternative assets such as cryptocurrencies. Hamilton ETFs recently introduced an Enhanced Bitcoin Day-MAX ETF, combining bitcoin exposure with covered-call writing on a Nasdaq 100 index ETF to produce income from otherwise non-yielding volatile assets.

Despite the growing appeal of covered-call ETFs, some financial experts urge caution. Matt Learning, lead planner at Mountainview Financial Planning in Vancouver, noted that while these funds may offer reduced volatility and tempting yields, they often underperform broad market benchmarks in total returns over the long term. He advises investors to consider traditional asset allocations aligned with their risk profiles before embracing covered-call strategies. According to Learning, the surge in covered-call ETF popularity may be driven more by investor demand for income than by the products’ objective long-term performance.