BMO Covered Call Canadian Banks ETF (ZWB.TO)

ZWU or ZWB? Add more to both? Utilities and banks, covered call. Wouldn’t add more, and be especially careful with the utilities one in a rising rate environment. Might want to use the Vanguard VXC, world index excluding Canada. Inexpensive, liquid. Encourage people to look outside Canada for growth.

Yes, you can buy and hold this in a TFSA. Its yield is close to the Canadian banks' yield. What is the covered call portion doing for it?

What's a covered call, international dividend ETF, hedged to the CAD? Just go with the S&P 500, made up of companies that have a footprint around the world. Consider ZWB-T, a covered call on Canadian banks. A hedge against CAD but has global exposure.

He owns lots of it because it's on the Canadian banks with some U.S. exposure. The banks have had a good run. Pays a 3.9% dividend.

He holds a lot of this. ZWB puts the covererd call portion on only 50-60%, so you also get the growth in the bank stocks. The Canadian banks will perform decently.

It should be dividend income and the covered call overlay is all capital gain. He does not see a lot of growth in the banks for next few years. This is the best way to hold them. He expects them to fall 25% from the peak during the next recession. The dividends are not in jeopardy.

ZWB-T vs. SU-T, which to sell. There is nothing wrong with Canadian banks long term. ZWB-T is his preferred way to play it. He got out of it when it retested last year’s resistance. He thinks we will test last year’s lows and then he would be a buyer. SU-T is a bellwether of the market but will underperform a lot of global oil plays. He would trim exposure and then look to buy it 10-15% lower. He would trim both here and look to buy them back.

He uses a lot of the ZWB-T. He is always looking at keeping the cost low. When looking at covered calls or managed ETFs, all of a sudden prices spike. He’s looking to buy from 5 to 15 basis points. But there are times when he will look at a different products like ZWB-T or the whole series they have, ZWH-T, ZWA-T, etc. But the different thing with the covered calls is that the persons sitting at the trading desks are actually making a difference and he thinks it’s worth paying for. When you buy a covered call you are giving up some of the upside in exchange for cash flow. With interests rates being so low, covered calls are a good way to get the flow of income. He uses covered calls to enhance the income of a portfolio. He’s been holding this for years.

He loves ZWB-T and it is a great way to hold the banks. But he sold out, taking profits, putting it into ZWU-T. This is a lot more interest rate sensitive. ZWU-T will outperform in a market correction as utilities are more defensive.

Unfavourable in a TFSA account because of the withholding taxes? It would not be in this case, because this is Canadian banks.

Equal weighted Canadian bank covered call strategy. Banks should settle into a trading range over the next couple of years so buy low and sell high. Wait until it pulls back. You could trim your position right now.

This has gone from around $21 to $19 and the yield is about 5.1%. A good entry point.

A sector play just on Canadian banks, which he likes better than a broadly diversified portfolio. His concern on a broadly diversified portfolio is the movement of different sectors in the course of a business cycle. You lose the sectors as they are rising, and you end up continuing to hold the sectors that are declining. This one is only one sector. The banks are averaging about 4.25% dividends, and about half the income comes from dividends and the other half comes from capital gains on the sale of options. They only write options on about 50% of the portfolio, so you are getting some upside anyways as banks continue to rise. A good ETF.

You have to look at the costs of the covered calls as well as MERs for these ETFs. The banks are so far performing the way they should. All banks are slightly down this year. In 2008 ALL the banks were down 40%. He would like to be more diversified. If we were in a long sideways market, then the covered calls would be beneficial.

Provides about a 5% yield, which is capital gains and dividends. Pretty much a core holding for him.