Hamilton Canadian Financials Yield Maximizer ETF (HMAX.TO)

Covered calls to maximize income, which get written "at" or "in" the money. You get a bigger premium for that, so the income looks larger. Challenge is that the portfolio changes a lot. Volatility to the downside probably due to less participation to the upside (and bigger participation to the downside) once that call is sold.

That's the tradeoff for maximizing yield. Not always best to go for the ETF with the highest yield. Be careful.

Banks, insurance companies, and the like. Financials should do well if we get more robust growth. Writes covered calls. You are exposed to market risk. So he wouldn't define it as a "safe" way to earn the 13% yield, which itself is telling you something.

Important point that yield does not equal total return. 70% exposure to the big 6 banks with an option overlay. Covered calls work best in sideways to slightly up/slightly down markets. Sacrifices upside. Up 23% over last 12 months, including dividends. 

But what was the cost of writing those options? ZEB, BMO's equal weight bank ETF, is up 33%. That's 10% upside given away because of the way call-writing works (get income today, but give away upside).

Not really for growth-focused investors, more for income investors. One strategy would be to hold some of this, but blend it with an ETF that doesn't write calls.

He's bullish the Canadian banks. HMAX would complement the caller's covered call strategy.

Pays a high yield, perhaps too high. Covered call, so generate high income, but less upside.

From Hamilton, a good company. But you have to take a close look at where the yield is coming from. If it's an outsized yield, there might be something going on. If it's from covered calls, he's all in favour. But there could be leverage, which he never uses.

Caught a lot of attention from DIY investors who are sorting by yield. Has amongst the highest yields ever seen, ~14-15%. When you see a double-digit yield, ask where it's coming from. Here, it's through very aggressive covered call writing. Gives you high yield today, but very little growth going forward; a tradeoff. Looking at total return over the long term, almost always underperform ETFs that don't use covered calls.

Best way to use this one is in concert with other forms of investment that will participate in a market rise, such as ZEB.

Portfolio of the 6 big banks. Really high distribution, with a covered call strategy on the full 100% of the portfolio. Covered calls cap the upside to get income; they work in sideways markets or those slightly up or slightly down. Consider pairing this with ZEB.

It is fine for financials and provides a little insulation. He wouldn't go any higher than 10% on a single ETF in a sector.

They do a good job. It carries a basket of financials and does not use leverage. To generate their 14% yield, they write the options right at the money. So you get no or little upside in the stock itself.

The base is around $14.50 an is making higher highs and higher lows. It's okay as long as the chart doesn't take out the last low.

Both hold financials,but ZWB uses covered calls. HMAX has performed a little better and offers a little more yield. ZWB writes only half the securities, so it takes in less yield, but gets more upside capture. The price return is 11% on ZWB in the past year vs. HMAX's 6%, but the total return is close. However, ZWB pays you you more of a yield. nearly 7%, but gives less growth. 

Good. Has a covered call overlay, holding financial services including lifecos, with an options strategy. It may have a little leverage, and a little more volatility but also a little more of a return. That said, if you're bullish on the underlying space, own the individual names for the long term. If you're short term or seek higher yields, then these products will generate higher, tax-efficient income, but will underperform long term. A rule of thumb.

ZWU is far more interest-rate sensitive, as it focuses on utility companies. Generally as interest rates fall, utilities do better. HMAX is financial services, insurance, lifecos. Falling rates not necessarily good for them, because they're more sensitive to interest rate cuts for a slowing economy with prospects of a harder landing.

So, if rates are coming down due to an economic slowdown (as he believes), then ZWU will probably outperform HMAX in the short run.

HMAX uses 'at the money' call options to enhance income. This, plus dividends, and capital gains, allows it to pay high income. Note the distribution rate does vary, and has declined a bit since inception. The fund could lag in a sector rally, and will still likely decline in a market correction. It is also entirely exposed to the financial sector. But for investors who understand covered call funds, and want enhanced income, we would be fine owning it. 
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