BMO Covered Call Canadian Banks ETF (ZWB.TO)

Stock vs. Stock: ZEB or ZWB. Dividends have been dropping over the last couple of years. The covered calls are a factor of the volatility. The Montreal exchange has an MVX index that is a measure of the volatility on the TSX. The premium from the options has been coming down and that is why you are seeing the dividends on this ETF dropping.

Canadian banks. 30 months without a 10% correction. 5 years into a bull market. Typically 4. There are examples in history with many more years before a meaningful correction. Likes ZWB which is an equally weighted Bank ETF with covered call strategy. It should not be more than a 10-20% correction. A healthy giveback. We won’t pull back as much as the US in a correction phase. Canadian banks should participate 70%

ZWB is a covered call and good for income. ZEB is good for growth. Banks are in good shape and he doesn’t have a problem here.

(Top Pick Feb 7/13, Up 16.19%) Not bought for growth. Really good yield.

Bank dividends have been going up but the yield on this has not. How long does this take? This should start being reflected at some point but remember, you are selling away the future growth of any bank names with covered calls. When Canadian banks rallied, you would not have gotten all of that rally.

(A Top Pick Feb 7/13. Up 9.16%.) This has 6 banks equal weighted with a covered call to enhance the income but they do it on each of the banks rather than the bank index. This gives you a better bang for your buck.

An ETF that gives a monthly stream of money but will be tax efficient? This is one that he likes, Covered Calls on Canadian banks, and the fundamentals are based on how well the banks going to do. You could also use the iShares DEX Short-Term Bond (XSB-T), which is straight interest. This can be combined with a couple of things like the ZWB. Or you could look at some street dividend plays such as iShares DJ Canadian ETF (XDV-T) or any of the dividend players from the major players.

Canadian Banks. If you like the dividend, ZWB-T is a better way to play because of the covered call overlay. Thinks banks will be range bound for the next 6-12 months and are fully valued. But good value in pullbacks.

He has never held or used this. Generally the premise is to add additional income by basically selling your upside in terms of the banks. Canadian banks are not that volatile, so the premiums you get for selling are not that high and you are giving away your potential upside.

(A Top Pick Dec 31/12. Up 12.54%.) With Covered Calls, you are Buying the stock and Selling the options. This one will only sell calls on roughly 50%-60% of the position and leave the rest as a Long position.

Average dividend is 3.2% in the banks, but this ETF has that exposure and a covered call overlay on half of the portfolio so yield is 5 to 5.5%. Valuation targets on banks are not for much more growth so you want to use this to get the higher yield.

(Top Pick Oct 26/12, Up 15.98%) He wanted the enhanced income from this one.

If you must be in the banks use this because of the covered calls. This will go down if banks correct but it gives you a higher yield while you wait. Go back to ZEB-T after the correction.

Likes this one but for diversification, you could look at the BMO Dow Jones Indus Avg Hedge ETF (ZWA-T). (See Past Picks.)

(A Top Pick September 17/12. Up 14.89%.) 50% hedged with Covered Calls and 50% not. Still a Buy. Still has a way to go.