Larry Berman CFA, CMT, CTA Covered Call US Banks ETF ZWK-T BUY Apr 22, 2024

Likes covered call ETFs on banks and dividend payers, not tech. He prefers BMO ETFs, because they run the covered call on 50-60% of the stocks, so you still get the upside on the balance. ZWK pays around 10% dividends, but remember you don't enjoy the tax credit in Canada on these American banks

Bought this to enhance gains, but has really enhance losses. A stinker. The Silicon Valley bank collapsed hit the entire US banking sector, but this sector is a core holding. The ZWK yield remains good. He's averaged down on this instead of dumping it. Disappointed, though.

Despite being better diversified, US banking space can be more volatile than Canada's. Because of covered calls, won't achieve as much capital growth as from ZBK or ZUB. As well, consider some of the active options as offered, for example, from Hamilton.

ZWK is one to look at; for a hedged version, look on the BMO website. But at this point, he'd rather have broader exposure than switching from global to US. Look at ZPAY.

There's been a lot of talk of Trump loosening bank regulations, which is a positive for ZWK, but if we hit a hard economic landing, the banks are not in a good space. He can't figure out Trump's end game. We could see a negative outcome, then a positive over the next 3 or so years.

These are covered call ETFs for banks, US (ZWK) or Canadian (ZWB). If tariffs and such are going to be negative for the economy, typically banks would underperform broader markets. He'd be cautious. Don't go out and sell right now, but be wary.

You'll probably get a better chance to buy in the next couple of months, when banks get a bit cheaper. In the meantime, ZST is a good place to park your cash.

This is an accounting item. There are 2 types of ROC, 1 good and 1 bad. The bad one is where the ETF provider is goosing up the return to be seen to be giving you more of a yield, but they end of giving you some of your own money back. That's not good. BMO doesn't do that.

To find out which one it is, you can call the ETF provider. Here's another way. Look at the underlying holdings. For example, assume they pay a dividend of 4%, there's an MER for the fund, and the option overlay generates a return of 2-3% a year. If you're being paid 6-7%, it's all good and you're getting it all. But if you're being paid 6%, but none of the underlying holdings pay 6% and there's no covered call overlay, then you're getting some of your own money back

Don't enter it now, because of the overall market. It's okay to take money out of overvalued tech and put it into this, but investing money market funds, no, doesn't like the bank sector to enter.

Likes it, but the question is, Do you want to be in US banks? If you expect us to go into a hard landing, US banks won't do well. Also, is this ETF taxable or not? Makes sense in a registered account. But after this recent rally be more defensive. Don't add money to banks now. It comes down to timing.