Best Covered Call ETFs Canada

CI First Asset Tech Giants Covered Call ETF is a covered call fund provided by BMO Global Asset Management, which aims to provide you with an actively managed portfolio of equities securities focused on the technology industry. BMO Global Asset Management has the strongest equity presence in covered call ETFs, and the BMO Covered Call Canadian Banks ETF is perhaps the top covered call ETF in Canada. In addition, BMO Canadian High Dividend Covered Call ETF gave investors concentrated exposure to stock securities offering a high dividend yield.

BMO Technology Covered Call ETF is designed to provide you exposure to tech-related and tech-related companies trading on North American markets, earning call options premiums. In addition, the High-Dividend Covered Call ETF weights the portfolio’s highest-yielding Canadian securities by yield, and it is diversified by multiple sectors. This section of my Canadian Top Covered Call ETFs Guide will discuss the pros and cons of investing in high-dividend covered calls ETFs, helping you make a better-informed decision about whether or not it is worth adding to your portfolio.

This section of my guide to the best covered-call ETFs in Canada will outline some of the best holdings available for Canadian investors and trim the list of funds you might need to consider if you are looking to invest in covered call ETFs. ETFs in Canada are a great trading strategy. Try refreshing your browser, or How Covered Call ETFs can deliver higher returns, and more about their risks and benefits, return to this video. We have brought on Rob Wessel, managing partner at Hamilton ETFs, to help investors understand how these products are designed and how investors can learn about their risks and potential benefits. ETF companies have taken varying approaches in striking a balance between providing call-writing yields while maintaining exposure to underlying securities. Industry-leading 14 ETFs are geared more towards capital appreciation, as they cap cover-call writing at 33% of each stock’s holdings.

Top Covered Call ETFs in Canada

The ETF is concentrated on just 12 holdings, a few of which are the top Canadian financial stocks. The ETF holds about 40 stocks from the U.S., but these are not the top-tier dividend stocks that one might expect with the name ETF. Instead, the ETF holds top U.S. healthcare stocks, which typically have lower volatility than the other sectors, and several of them pay decent returns that complement gains from options premiums.

Unlike ZEB, this ETF does not just target the big six banks of Canada (although it does hold all of those); it is designed to provide investors exposure to the whole financial industry here in Canada. The ETF is also intended to provide Canadians with exposure to European markets and boost their returns each month. So yes, you will make more money using BMOs Canadian Bank ETF. Still, the focus with Horizons is on providing exposure to the whole financial industry right here in Canada, with various insurance companies, banks, and asset managers. BMOs Toronto-based six asset management company ETFs are also organized into geographically-based, higher-dividend strategies, from Canadian and American markets to European and global markets.

When we compare its allocation with ZEB, BMOs uncovered-call Canadian banking ETF, which earns 3% or so lower, it is not exactly doubling, but it is close. In ETFs, we have to look at forward yields based on one of the recent payouts because distributions are not correlated.

Cover Call Pros If stock prices move sideways over the next couple of months, we would collect $200 of the forward yield while holding our 100 shares of stock ABC. We would either need to purchase a covered call option back to offset our sales, or the options we sold would have been exercised, forcing us to sell stock at our strike price. If the call options buyer exercises, the seller has the underlying shares, and they could sell them.

When an investor sells a call option at a premium, the investor keeps the premium should the option not be exercised at the time of the contract’s expiration. Calls are options to purchase an individual fund holding at a later date, typically several months, for a specific price (or “strike price”). For example, say a fund has an expense ratio for a stock of $100, and it sells calls at $2 for the right to buy that stock at $105 on a specific date.

The commitment means little loss when a given asset falls in value, but the seller still stands to gain should it rise in price, provided that the calls are not in cash. Call options sellers, taking on higher risks of losses with limited potential to profit in a given month, have fared far better over the long term. Because perceived risk and actual rewards correlate, low risk to a call option buyer leads to pretty poor returns over the long term. Each month, the drive to earn higher returns is so strong that covered call investors will happily sacrifice some long-term appreciation for higher short-term returns.

After all, people would be willing to purchase call options on high-growth options such as Shopify at much higher prices than they would for non-growth stocks such as BCE. So investors may look at a new fund, such as the Hamilton Multi-Sector Advanced Covered Call ETF, which has an 8.5% target yield, even though its sector mix is largely similar to this same index. ETFs generating options-promised returns are a convenient alternative–at management expense ratios typically in the 70-100 basis points range-to holding stocks directly, where calls could be written.

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