Horizons Enhanced Income Energy ETF (ENCC-T)

An equal-weight index in energy, not market cap. Half of this is a covered call strategy, so you keep half the upside. MER of 0.84%.

Dividend (~14%) hard to maintain. In short run, energy a good trade. Expecting strength in oil prices (~$70). Would not recommend for the long term, but good short term option. 

Bullish on energy.
Good long term hold.
High dividend yield that can be risky (13%).

Buy, hold or sell? Liked it till recently. Have difficulty seeing any upside with the oil price in Canada. Normally he would say buy it, now he would say look at the US.

This depends on your view of energy. It has a very nice yield. If he wants an energy play and wants to be conservative, he would definitely buy this. In most cases, when he is dealing with a commodity like this, he prefers it to be unhedged with a covered call. On anything that is of a riskier commodity nature, he wants to have the full growth.

With the acquisition of COS-T, covered calls won’t benefit after a certain debt. The takeover will probably not benefit an ETF with a covered call.

Not sure how safe the dividends are. They have inexpensive ETFs based on swaps. He is not concerned that it is derivative-based. It is currency hedged.

An ETF of energy stocks and “covered calls” are written on all the positions. Understand what covered calls are all about. Hypothetically you have stock trading at $28 and you write a covered call option for $30 which will bring in $0.40. The cost is now $27.60 but if the price now goes to $30, then you are obligated to sell. If the stock goes to $35, $40, too bad, you have to sell at $30. Covered calls work wonderful in ranging markets. If you think things are going higher, you don’t want to do covered calls.

A BMO ZEO with no covered call it yields 3.2 but HEE-T gets it up to 6 or 7% with the covered call strategy. If you think the energy sector is going up over the next year or two, then go with ZEO, otherwise go with HEE, which he thinks may be better for now.