BMO Covered Call Canadian Banks ETF (ZWB.TO)

Covered call overlay should outperform in a sideways market. Money in banks is dead money.

If there is financial systemic risk, banks underperform considerably. It is not a risk-free, easy place to go.

Really likes this. Has a good dividend yield. Likes the way they manage it, having only about 60% at any given time.

A core position for him. It has weakened now, so he likes it even more. He is not negative on Canadian banks. They have been positioning themselves by Selling preferreds, to make sure they top up their capital situation. Also, with the covered call overlay, that is very useful in terms of boosting the yield, but they leave part of it uncovered too.

BMO Covered Call Cdn Banks (ZWB-T) or Horizons Enhanced Income Financials (HEF-T)? It is probably time to move from a Covered Call scenario where they yield 7%. If we do have a rising rate environment again, it is going to be a bit more of a “south of the border” scenario. If it is a North American phenomenon and we don’t hit the wall that everybody has been waiting for, then just being Long the Canadian banks, without having covered calls is the way to go. Thinks the US banks have a lot of upside.

A Covered Call strategy owning some of the major banks and paying a premium based on a Call Strategy along with the dividends. When using Covered Call strategies, if you feel the sector is going to be somewhat flat or moderately moving higher, it is a good strategy. If you feel the sector is moving down or going to take off, you probably don’t want to own the sector. In a Covered Call strategy, you will be called out of the securities as the shares move higher. Bank stocks have been kind of flat in the last little while, so it is actually not a bad strategy to own while picking up that extra premium through the yield.

Has this as pretty much of a core portfolio holding. Some of the banks were getting a little beaten up of late, but some have bounced back. Paying around a 5.5% dividend. Rather than buying a covered call yourself, you can just use this if you like Canadian banks.

ZEB-T Vs. ZWB-T. He does not like the growth in earnings outlook for Canadian banks over 3-5 years. Prefers ZWB-T because of the covered call overlay. If the banks went down 20% for some reason then he would look at ZEB-T again.

High quality product. Great diversification. He favours this as an investment going forward.

This one only writes covered calls on half the portfolio, so it will not be as held back as much if banks really take off. The covered calls are above the money so you are not giving up as much upside.

They take their equal weight banks and write calls against the banks so it boosts the income. He doesn’t own Canadian Banks. He is looking for a buying signal.

The thing with any Covered Call strategy is that it is predicated upon the risk of the underlying stock or ETF. He holds a lot of this, and it is pretty much a core holding. This yields about 5%-5.5% minus the fees.

BMO Covered Call Cdn Banks (ZWB-T) or iShares Cdn Financial Monthly Income (FIE-T)? In Canada he would stay with the covered call. This product is huge and it is liquid. The banking side is something he is comfortable with.

Is the MER in the published return? The NAV includes the MER being taken out of it.

This is a covered call strategy on the back of Canadian stocks. When looking at covered call strategies, what you want to see is the underlying stocks being flat. If you think they are flat, you are getting the extra premium on top of the dividends. If you think that banks are going to take off, you probably want to own the underlying banks rather than the actual covered call strategy. Some of the banks right now are trading at around 10X PE, which is below its 11.5X median over the last 5-10 years. Some of the Canadian banks are showing a little bit of value at this point.