Stan WongBMO CDN HIGH DIV COVERED CALL ETFZWC.TOCOMMENTJun 09, 2020

Defensive product with relatively good yield. Good option for Canadian oriented investors. Provides safety with defensive orientation. Good for a balanced portfolio. 

Hold the big Canadian banks, Enbridge, BCE and Manulife. But the option premiums on these stocks is small.  So, you're selling some of the upside potential, but not getting downside potential. But this pays you high-paying dividend stocks at a 0.72% MER.

ZPAY is his favourite way to play the US market. European ZWE is for Europe and if you need Canadian exposure. ZPAY is designed to yield around 6%. Will have some volatility but will have half of what the S&P will see.

Covered calls give you a boost in the distribution. Not a bad strategy when market is flat or slightly negative. If market continues to go higher, you're better off owning the underlying securities. Consider XEI instead, no covered call. Owns the securities outright, and so you won't get as high a dividend, but you might get more performance. In last 6 months, XEI returned17-18%, whereas ZWC returned 10.68%.

Compare to ZDB-T. The covered writing ETF including dividends is under-performing the simple buy and hold strategy. During a recovery, the covered written stocks are capped on the upside. You get a slim amount of option premium because the premiums are priced on the volatility of the underlying equity. Don't let your whole portfolio be covered written. Be careful.