BMO US Put Write ETF (ZPW.TO)

VIX volatility based ETFs. Problem with volatility futures is you have to be nimble like a brain surgeon. Or you could lose 5-10% a month. Would recommend shifting to more defensive holdings like ZPW to preserve capital. Gives you insulation on the downside, plus some yield. For the average investor, stay away from the VIX based ETFs.

ZPW-T vs. ZWH-T. ZPW-T has no capital growth – it is purely a yield play. ZWH-T can be paired to get downside protection. There is a third of the risk of the S&P-500.

It is denominated in US$. If you look at ZPH-T, which is hedged, it has a 4% return year over year. Currency fluctuations impact ZPW-T. He likes to pair it with ZWH-T, and then you get a yield in the US market that is three times the S&P 500 but with less risk. Currency is actually the most important consideration when you invest internationally. Currency averages 5.4 percentage points' impact on your investment returns internationally.

ZWH-T and ZPW-T. Both he often recommends. This pair of ETFs offer you a great opportunity for exposure to the US. You have the best quality of dividend payers and a covered call and put-write overlay. He loves that strategy to play defense on the US market. Short term he thinks we will get a 5% or so pull back. This pair of ETFs will do well over the next 4 to 5 years.

ZWH-T, ZPW-T. Great puts being written 10-20% below where holdings trade gives an imbedded margin of safety. You get a great source of diversity. He likes to pair these two when he is negative on the markets. He is going to be adding these to portfolios. It helps to mitigate downside while giving you some yield.

(Past Top Pick on June 15, 2017, Down 0.15%) Disappointing. Active management would've helped this ETF. The advantage of put-writing in the U.S. is that you're selling option premiums that have implied in the contract the dividend in the underlying security. The capital is flowing into the fund as capital gains whereas the dividend is ordinary (taxed) income. He'd rather get the former (dividend implicit in the option premium as a capital gain).

The biggest challenge is that implied volatility is so low that you cannot harvest enough yield from a put write portfolio. You are exposed to the US$ also. ZPH-T has a currency hedge. He would prefer this after the dollar pulls back.

This is basically on the US market. As far as he knows, there isn't one on the Canadian market. Most of the people that do Put writing, are doing it on their own, and most of them leverage it. This is a different asset class, and is similar to a Covered Call except that you have your cash rather than holding the stock. This has a good yield. If you are comfortable with options, there is nothing wrong with this.

Similar risk as covered call, but you’re holding cash instead of the stock and selling the puts. Yields around 6%. He doesn’t include it in his portfolio because it confuses his clients.

The risk is that if the market goes down, you basically get killed. Doing Put Writes and selling Covered Calls are basically the same risks. With Covered Calls, if you buy ZWB on the banks and the banks tank, you lose money. With the Put Writes, you are not owning the shares and is a more aggressive strategy. For someone who is retired, he prefers the Covered Calls. You have to know what you are doing.

Writes put options across many sectors. The decline over the summer was all currency. You might want to go to ZPH-T if the dollar gets down to a $0.80 dollar. It has not had the down move of ZPW-T.

It writes puts 15-20% below current levels to harvest a 6-8% yield. It has been at the low end of that. The entire decline in valuation this year is about the increase in the CAD$, not because the underlying holdings have any problem. ZPH-T is the identical holdings, but not exposed to the US$. He likes adding US$ here. Swap to ZPH-T if we get back to an $0.80 CAD$.

It is exposed to the US$. There is a hedged version (ZPH-T). It finds the best quality US companies across all 10 sectors and then it writes puts 10-15% below market and harvests the yield. When volatility is low, as it has been previous in the year, you can’t generate as high a yield. The entire down move we saw is because of the strengthening of the CAD$.

A very interesting way and a little more diversifying, then what he normally does, of Covered Calls. He likes the product, but doesn’t buy it himself because he deals with a client base that is fairly mature.