BMO Covered Call Canadian Banks ETF T.ZWB

Alternate Symbol(s): T.ZWB.U | BMDLF

The ETF seeks to provide exposure to the performance of a portfolio of Canadian banks to generate income and to provide long-term capital appreciation while mitigating downside risk through the use of covered call options. To achieve investment objective the ETF will primarily invest in and hold the securities of Canadian banks, ETFs, or a combination of these. Depending on market volatility and other factors, the ETF will write covered call options on these securities. Under such call options, the ETF will sell to the buyer of the option, for a premium, either a right to buy the security from the ETF at an exercise price or, if the option is cash settled, the right to a payment from the ETF equal to the difference between the value of the security and the exercise price.

TSX:ZWB - Post by User

BMO Covered Call Canadian Banks ETF

Bullboard Posts

Comment by Banner403on Apr 06, 2011 3:21pm

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Post# 18395014

RE: RE: RE: Opened up a position today...

It looks as though (for now) ZWB has one half of the etf just in the equal weight bank etf (with no calls) but the base dividend rate for that should be 4% plus. So covered calls are written on approximately half of the etf. HEX (as far as I know, writes call options on all 30 stocks every month, but the base dividend rate for all of the stocks is alot lower - probably in the 1.5% range. I would expect the full menu of covered calls of HEX would compensate for the lower dividend rate and both should result in similar yield(s). Banks are still doing fairly well, so I expect that the unhedged half position of ZWB will result in better equity appreciation for the near term. If there is another significant correction, which I expect this year - HEX will probably perform slightly better. I currently have a full position in both, and have alot of money parked in cash. GL

LS

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