BMO Covered Call Canadian Banks ETF T.ZWB

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

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 > Update

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Comment by marcroberton Jan 06, 2023 3:29pm

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Post# 35207713

RE:RE:RE:RE:Update

half of the dividend is return of capital, so actual yield from underlying investments is under 4%, the rest is your own capital back to you, which lowers your acb in a non reg account by the way,. which means you pay more cap gains tax at sale. this is the classic strategy of bmo funds and others - pay a lot distributions, make it look like the investments are generating 7+% yield, but the unit price doesnt do anything, because they're giving you part of your shares back. if you bought cm today you have a 6% yield, 100% eligible dividend, and no capital returned. the distribution is generated from profits, not from selling assets.

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