Larry Berman CFA, CMT, CTA BMO US Put Write Hedged to CAD ZPH-T COMMENT Apr 24, 2017

ZWE-T vs. ZPH-T. ZPH-T is the put write strategy. If we have an acute sell off, both will lose a little money. If you are branching outside of Canada, there is no dividend tax credit, but put write gives additional income. He recommends having a bit of both in order to diversify. Europe is a bit more attractive over the next couple of years.

It contains some of the best quality companies in the US. BMO write puts 15-20% below the market price. They generate additional income from the puts. Every month if the markets don’t fall to those prices, then they harvest the income on those puts. BMO does not want to own the stocks so if necessary they buy the option and re-write the put. He expects 6-7% from it. If it is not working out the way you hoped, pricewise, then you have to ask if you can take the asset and put it somewhere else. This ETF won’t grow in price.

ZPH and ZPW way to extract yield from the market without taking a lot of risk. They have been okay but not great. ZPAY is a better way to benefit from the same strategy.

They write puts and buys good companies at lower prices and sells high. He would cycle out of ZPH and ZPW to ZPAY which generates a rate of around 6% but with a better strategy.

Would not suggest Put Write strategy (ZPH). Would prefer ZPAY for the US market. ZPH never owns the stocks whereas ZPAY wants to own the stock at better prices.

Idea was to extract tax-efficient income out of the market. Hasn't taken off in a big way. See ZPAY.