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GraniteShares plans to boost leverage levels on US single-stock ETFs

By Suzanne McGee

Nov 30 (Reuters) - GraniteShares plans to increase the amount of leverage on most of its single-stock exchange-traded funds (ETFs) to 200%, allowing investors to make bigger bets on daily movements in a handful of widely traded stocks, a Thursday filing with the Securities and Exchange Commission showed.

In the filing, GraniteShares said the move, which will include leverage boosts of 0.25 to 0.50 percentage points on ETFs targeting particularly volatile stocks like Tesla and Nvidia, will become effective January 22, 2024. The company declined further comment.

The ETFs currently feature leverage levels ranging from 1.25x to 1.75x, meaning that the issuer has structured the funds to deliver between 125% and 175% of the daily underlying share price move in stocks like Tesla, Meta and Coinbase. In many cases, issuers of these single-stock ETFs make "pairs" available, allowing investors to bet either that the underlying stock will rise or fall over the course of the day.

Approved in July 2022, single-stock leveraged and inverse ETFs have become one way for speculators to bet on the most volatile stocks, especially around earnings reports and other news.

But not all large, actively traded stocks make for good single-stock ETFs, said Todd Sohn, ETF analyst at Strategas.

"When these were first approved, there was a whole swathe of products and announcements, and some of them were real head-scratchers; there just wasn't that much interest or activity," Sohn said.

For instance, AXS Investments launched 2x bull and bear ETFs on Pfizer in July 2022, only to close them about six months later. Other planned single-stock ETFs haven't even been launched.

In the latter category are some of GraniteShares single-stock ETFs tied to companies like American Airlines and Lucid Group Inc. on which the ETF provider now plans to boost leverage levels.

"More leverage could generate somewhat more interest" in trading single-stock ETFs that either have lackluster trading volumes or have yet to be launched due to anemic investor interest, Sohn said.

By far the largest of the existing single-stock GraniteShares ETFs is its 1.5x Long NVDA Daily ETF, which allows investors to bet on the moves of artificial intelligence chip leader Nvidia Corp and has assets of about $253 million. In contrast, the 1.25x Short TSLA Daily ETF has $1.5 million in assets.

(Reporting by Suzanne McGee; Editing by Ira Iosebashvili and Chizu Nomiyama)