John DeGoeyBMO Covered Call Canadian Banks ETFZWB.TOBUYDec 20, 2011

Would recommend buying in tranches to reduce risk. Good investment if believe bottom in banks. Could be a good time to start nibbling. 

Getting close to price that offers value to investors.
Recent share price weakness a good time to buy.
Quality names in Canadian banking sector.

If volatility is high - good to own.
If bullish on economy - better to own pure play bank stocks.
Economic weakness ahead, so better to own ZWB. 

Covered call writing strategy.
No leverage.
Beneficial to get professional advice on sophisticated product.
Vague on buying strategy.

Our favourite covered call ETFs involve underlying assets that have a history of appreciating over time. For that reason, we like is the BMO Covered Call Canadian Banks ETF (ZWB). It has a 7.5% distribution yield, a higher AUM of $2.9B, and over the past 10 years it has returned 8.1% annually with distributions reinvested.

For investors seeking monthly income, covered calls can be a good approach, however, for the average investor we do not typically like the cap on price appreciation that covered call ETFs have, and for an uptrending market, we would prefer to own the underlying assets outright rather than covered calls.
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Canadian banks are a core holding for him. Covered call boosted the yield in his portfolio.

Banks now may not be star performers as in the last 30 years. Interest rates are rising now and could stay this way for a while. Loan loss provisions will increase in a weakening economy. But of this class, he likes ZEB and ZWB (a covered call one for income) which he prefers, because he expects banks to be sideways and the covered call will enhance returns. You could buy a combination of the two.

Average decline in the underlying stocks not offset by extra divided yield.
Poor market is reason for falling share price.
Good product for defensive investors.
Good product for exposure to Canadian banks.