BMO Covered Call Canadian Banks ETF (ZWB.TO)

The idea with the Covered Call, is generating income from the volatility of the underlying banks. When they are going sideways, these things are not that bad. So you have to decide if you are very bullish on the Canadian banks or whether you are neutral to moderate on them. He has always been an advocate of owning the actual banks, without any monkey business surrounding them. Dividend yield of 5.69%.

He likes this and has no problem with the Covered Call Bank ETF. The yield is a lot more than if you bought an individual bank.

Because he thinks the Canadian banks will generally go sideways, this one equal weights all the big banks and gives you a covered call overlay and giving a yield of close to 6%. This is a great way to get some yield.

He likes this. What is interesting is that they are not writing options against the entire portfolio. They write against about half the portfolio and are using the option premium to augment the cash flow. Thinks the yield is a little over 6%.

Banks: do you sell and then get back in? Depends on how active a trader you are. Look at ZEB-T, an equally weighted ETF. Long term you could ask if we are going back to 2011/12 levels. Is oil going to stay low long enough. He does not know. Some people say yes, some people say no. He likes ZWB-T because you get the yield enhancement.

This is the way to play banks right now because they won’t grow for the next couple of years. He has been adding to his position. A 5% yield.

He likes it because banks are going to go sideways for a year or so and this one is a covered call strategy. This is the way to play banks. He has been adding in the last week or so.

He traditionally has not been a fan of the Covered Call strategy. Year-to-date this is down 5% with a yield of 5.4%. You can get the Canadian banks with their full upside potential, and still get a yield of about 4%. He would be more inclined to just own the Canadian banks straight up. His 2 favourites are Royal (RY-T) and Bank of Nova Scotia (BNS-T) and TD (TD-T) would be third.

This owns a basket of Canadian banks. If you are comfortable on a long-term basis of holding banks, which he is, this is one that you could actually buy and forget about it. You are getting a monthly distribution which is coming in 2 forms of partly dividends and partly capital gains. About a 6.5%-7% yield. A great hold.

Putting Cash to Work. Canadian banks are a great source of dividends. ZWB-T is near maximum position in his sleep at night portfolio. The covered call overlay enhances his returns. There still could be a 5% pull back. Add or buy as it gets to this.

With interest rates supposedly rising in the next 6-8 months, would you choose the BMO Equal Weight Cdn Bank (ZEB-T) or the BMO Covered Call Cdn Banks (ZWB-T)?Generally what you want to know about what works best for a Covered Call strategy, is that when you feel that a particular sector is going to be relatively flat, or maybe slightly negative, that is when you are going to get the dividend on top of the covered call premiums. If you think banks are going to take off and do extremely well, you might as well own the Equal Weight basket.

He likes it. The banks are not over levered. Higher yields play right into the bank’s sweet spot. They aren’t paying much for money these days. It is a monthly pay ETF and contains capital gains and dividends.

This had been one of his Top Picks and he still likes and holds it. Likes the returns he has been getting. About 60% of this has Covered Calls on it. Has done very well in a rising market, but is going to get beaten up when the market backs off a little bit. However, the covered calls tend to mollify that a little.

Banks as a group move together. There is going to be a correction on the market and we have already seen weakness in the banks because of their exposure to the oil sector. However, banks are one sector that you can own for a while. It could pull back, but if you are a longer-term investor, he doesn’t know if you should be panicking.

Don’t use it as a replacement for bonds. Banks will go down during financial a crisis in another region. With this one you get the covered call overlay and this is a better way to get the higher yield if you are not considering it a bond.