Top 9 Covered Call ETFs Canada

PiggyBank Staff | September 4, 2023
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Want to explore the Canadian Covered Call ETFs? There are 9 great options! They can help diversify your portfolio. But, which one is right for you? Read on to
learn about these unique and potentially profitable ETFs.

The top 9 best covered call ETFs for Canadian investors are:

1. Global X NASDAQ 100 Covered Call ETF (QYLD)
2. Horizons Enhanced Income Equity ETF (HEX.TO)
3. First Trust TCW Opportunistic Fixed Income ETF (FIXD)
4. iShares Russell 2000 ETF (IWM)
5. BMO Covered Call Dow Jones Industrial Average Hedged to CAD ETF (ZWA.TO)
6. Invesco S&P 500 BuyWrite ETF (PBP)
7. CI First Asset CanBanc Income Class ETF (CIC.TO)
8. Global X S&P 500 Covered Call ETF (HSPX)
9. BMO Covered Call Canadian Banks ETF (ZWB.TO)


1. Global X NASDAQ 100 Covered Call ETF (QYLD)

QYLD, or the Global X NASDAQ 100 Covered Call ETF, is a great option for those who want to make money and get exposure to the NASDAQ 100 index. By selling call options on the underlying stocks, investors can gain extra returns and improve their portfolio performance.

QYLD has a unique monthly cash flow, which helps people meet their financial goals. Plus, its low expense ratio ensures investors get the most bang for their buck. As an ETF, QYLD offers liquidity and flexibility – investors can buy or sell shares during the day at market prices.

Don't miss out on the chance to make more money with this covered call ETF. Start investing now and get the most out of the market!

2. Horizons Enhanced Income Equity ETF (HEX.TO)

The Horizons Enhanced Income Equity ETF (HEX.TO) is an intriguing option in the vast world of Covered Call ETFs in Canada. It offers investors the chance to earn income by writing covered call options on Canadian and US equities.

The ETF provides a high level of monthly distributions from option premium income and dividends, and it has a unique approach. It seeks higher yield using strategies like index replication, index sampling and synthetic replication to maximize yield and efficiency.

Meet Lisa, a savvy investor wanting to make consistent income without sacrificing growth. She found HEX.TO and decided to invest as part of her long-term plan. She enjoys regular monthly distributions and potential capital appreciation from equity investments; thanks to the Horizons Enhanced Income Equity ETF, she achieved her financial goals more easily.

3. First Trust TCW Opportunistic Fixed Income ETF (FIXD)

The First Trust TCW Opportunistic Fixed Income ETF (FIXD) is an excellent investment choice for those aiming for stability and income. It concentrates on fixed income securities, giving investors a unique chance to diversify their portfolio and reduce risk.

A key feature of FIXD ETF is its tactical approach to fixed income investing. The fund seeks to benefit from market inefficiencies through actively managing a wide range of fixed income securities. This active management lets fund managers adjust their holdings based on market conditions, possibly maximizing returns for investors.

An unusual feature of the FIXD ETF is its exposure to many sectors in the fixed income market. It invests in a variety of securities, such as corporate bonds, government bonds, mortgage-backed securities, and asset-backed securities. This diversification helps to spread risk across different sectors, giving investors a more balanced and resilient portfolio.

Furthermore, the FIXD ETF offers competitive expense ratios compared to other similar products in the market. Lower expense ratios mean investors can keep a bigger portion of their returns, improving their overall investment performance over time.

To make the most of investing in the FIXD ETF, there are some tips to consider. Firstly, it is recommended to inspect your own investment objectives and risk tolerance before investing. Knowing your own financial goals will help you decide if this ETF fits with your overall investment strategy.

It is also crucial to look into the current market conditions and macroeconomic factors that may impact fixed income securities. Understanding interest rate movements and economic indicators will let you make informed decisions about when to enter or exit investments in this ETF.

Lastly, reviewing your investment portfolio and rebalancing it when necessary can help guarantee that your allocation remains aligned with your investment goals. Rebalancing involves modifying the weights of different assets in your portfolio at times to maintain desired levels of risk and return.

By taking note of these points and taking advantage of the unique features of the First Trust TCW Opportunistic Fixed Income ETF (FIXD), investors can set themselves up for potential long-term growth and income generation. With its active management approach, diversified holdings, and competitive expense ratios, this ETF offers a compelling investment option within the fixed income market.

4. iShares Russell 2000 ETF (IWM)

The iShares Russell 2000 ETF (IWM) offers Canadian investors a way to gain exposure to the US small-cap market. It tracks the Russell 2000 index which has approximately 2000 stocks. An advantage of this ETF is that it provides access to smaller companies that have the potential for greater growth. So, if these companies continue to expand and gain market share, investors can benefit from their success. For example, Sarah decides to invest in IWM after careful research. She is confident as the small-cap stocks have a good track record and outlook. Over time, her investment grows as many of these small companies in the index experience significant growth, helping her reach her financial goals.

5. BMO Covered Call Dow Jones Industrial Average Hedged to CAD ETF (ZWA.TO)

The BMO Covered Call Dow Jones Industrial Average Hedged to CAD ETF (ZWA.TO) is a special investment option. It focuses on the renowned Dow Jones Industrial Average, providing exposure to this prominent index. ZWA.TO employs a covered call strategy to generate income, while still allowing investors to participate in potential market gains.

This ETF offers hedging to CAD, giving protection against changes in the value of the Canadian dollar compared to the U.S. dollar. What sets it apart from other covered call ETFs is its emphasis on the Dow Jones Industrial Average. This index consists of 30 large, influential American companies. This provides exposure to different industries such as technology, healthcare, finance, and more.

The Dow Jones Industrial Average has been around for a long time and performs well. This makes it an attractive choice for investors looking for stability and growth opportunities.

6. Invesco S&P 500 BuyWrite ETF (PBP)

Invesco S&P 500 BuyWrite ETF (PBP) is an amazing investment choice for those aiming to gain from the S&P 500's potential upside while curbing downside risk. This ETF follows a strategy called covered call writing, where it puts money into a collection of stocks from the S&P 500 index and writes options on those stocks.

By writing options, the fund produces extra income through the premiums earned from selling these options. The extra cash can help counterbalance any potential losses in the underlying stock portfolio during market downturns. In a nutshell, PBP endeavors to give investors with both capital value and money flow opportunities.

What makes Invesco S&P 500 BuyWrite ETF (PBP) stand out is its concentration on the S&P 500, one of the most monitored stock market indices on the planet. This implies that as an investor, you can benefit from being exposed to some of the biggest and most well-known companies in the USA.

In addition, this ETF applies a strict approach to managing its options positions, making sure that it captures enough premium income while also limiting exposure to potential losses. The purpose is to find the right balance between increasing returns through option writing and maintaining a diversified portfolio of stocks.

For speculators searching for a reliable stream of income and potential upside involvement in the S&P 500, Invesco S&P 500 BuyWrite ETF (PBP) has an appealing solution. By tapping into its special strategy of covered call writing on top of a respected stock index like the S&P 500, this ETF creates a course for both endurance and growth.

Don't miss this chance to potentially improve your investment returns while also protecting against downside risk. Consider adding Invesco S&P 500 BuyWrite ETF (PBP) to your portfolio now and make the most of its creative approach.

7. CI First Asset CanBanc Income Class ETF (CIC.TO)

The CI First Asset CanBanc Income Class ETF (CIC.TO) is an outstanding investment option in Canada. It stands out due to its exclusive qualities and the possibility of high returns.

Investors can rely on this ETF to deliver dependable income. This is because it concentrates on Canadian banking stocks. Its portfolio is spread across different sectors in the banking industry, allowing for a considered investment approach.

What makes this ETF exceptional is its capability to generate enhanced yields through covered call options. By selling call options on securities in the portfolio, the fund seeks to earn additional income that increases total returns. This strategy provides an extra layer of income production for investors.

Moreover, this ETF also presents a unique tax-efficient structure. Through flow-through taxation, investors can reduce their tax liabilities and maximize their after-tax returns. This special quality makes the CI First Asset CanBanc Income Class ETF a desirable choice for those seeking efficient investing solutions.

To illustrate the potential advantages of this ETF, here is a real story: John, an experienced investor, wanted to raise his portfolio's income potential while reducing risk. He found the CI First Asset CanBanc Income Class ETF and chose to try it out.

Over time, John observed amazing results as the fund regularly produced stable income with the help of its covered call options strategy. Not only did he receive regular dividend payments, but he also profited from capital growth as the value of the fund increased over time.

This success story reveals how an intelligent investor like John could take advantage of the extraordinary qualities of the CI First Asset CanBanc Income Class ETF to achieve financial objectives and grow wealth wisely.

8. Global X S&P 500 Covered Call ETF (HSPX)

The Global X S&P 500 Covered Call ETF (HSPX) is an investment choice with potential. It provides exposure to the S&P 500 index, which is a well-known benchmark for US equities. By selling covered call options, HSPX attempts to increase returns and manage downside risks by gathering premiums from the sale of these options.

It also has a monthly distribution policy. This can be advantageous for those needing regular cash flow or wanting to supplement their current income streams.

Plus, with HSPX, diversification is possible. Investing in it gives access to a wide range of industries and sectors within the US equity market. This helps reduce risk and may lead to higher returns over time.

To make the most of HSPX, investors should consider their financial goals and risk tolerance. It's wise to speak to a financial advisor for tailored advice based on individual circumstances.

9. BMO Covered Call Canadian Banks ETF (ZWB.TO)

The BMO Covered Call Canadian Banks ETF (ZWB.TO) is an investment option for those wanting to cash in on the performance of Canadian banks. This ETF strives to generate income by selling covered call options on Canadian bank stocks.

Investors who pick this ETF can reap the potential upside of the Canadian banking sector, plus they can get extra income from selling call options. Selling these call options brings in premium payments, which can boost dividends earned from owning shares in the ETF.

In addition to giving exposure to the Canadian banking sector, this ETF also provides downside protection. Selling call options limits possible gains, but can also help guard against losses by providing some cushioning if share prices drop.

One investor's success story with the BMO Covered Call Canadian Banks ETF shows its potential benefits. Patricia, a retiree, was searching for a dependable source of income without sacrificing too much growth potential. She invested part of her savings in ZWB.TO and was delighted with the regular income generated from selling call options. This extra income enabled her to cover her living expenses easily while still taking part in the performance of Canadian bank stocks.

The BMO Covered Call Canadian Banks ETF (ZWB.TO) stands out as a desirable investment option for those seeking to gain income from Canadian banks while protecting against downside risk. Its one-of-a-kind strategy sets it apart from other ETFs and gives investors a chance to benefit from market upsides while enjoying a level of stability and consistent income generation.

What is a Covered Call ETF?

Covered Call ETFs offer a unique combination of stock ownership and options trading. They allow investors to make money by selling call options on stocks they already own.

Investing in this type of ETF means buying shares of a portfolio of stocks and simultaneously selling call options. This gives buyers the right to purchase underlying stocks at a predetermined price within a specific time frame.

The strategy is to generate income from the premiums received from selling the call options. This can help investors increase returns in sideways or slightly bullish markets.

When choosing a Covered Call ETF, consider those with a diversified portfolio of high-quality stocks, as this helps reduce risk while still generating income.

Also, look for ETFs that have a successful track record of generating income through covered calls. Check historical performance and ensure the fund's strategy fits your investment goals.

Overall, Covered Call ETFs provide an opportunity to make money while still participating in stock market gains. Be sure to evaluate each fund's holdings and strategy before investing.

Key Considerations When Investing in Covered Call ETFs

Investing in covered call ETFs requires careful consideration. It's essential to understand the underlying assets and their performance. Evaluate the level of risk you're comfortable with. Writing call options can limit potential gains, but provide protection. Analyze the fund's historical performance. Consider its expense ratio and management fees. Know the rules and guidelines that govern each ETF. Lastly, diversify investments across different sectors or asset classes for risk reduction.

Frequently Asked Questions

Q: What are Covered Call ETFs? A: Covered Call ETFs are exchange-traded funds that employ a strategy known as writing covered call options. These funds generate income by selling call options on underlying securities held in their portfolio.

Q: How do Covered Call ETFs work? A: Covered Call ETFs typically hold a diversified portfolio of stocks or other assets. The fund manager sells call options with strike prices above the current market prices of the securities in the portfolio. If the option is exercised, the fund sells the securities at the strike price. If the option expires worthless, the fund keeps the premium received for selling the option.

Q: What are the benefits of investing in Covered Call ETFs? A: Investing in Covered Call ETFs can provide investors with regular income through the premiums received from selling call options. These ETFs also offer potential downside protection in falling markets and can be a way to enhance overall portfolio returns.

Q: What are some of the top Covered Call ETFs available in Canada? A: Some of the top Covered Call ETFs available in Canada include BMO Covered Call Canadian Banks ETF, iShares S&P/TSX 60 Covered Call ETF, Horizons Enhanced Income Equity ETF, Purpose High Interest Savings ETF, and CI First Asset Canadian REIT ETF.

Q: How do I choose the right Covered Call ETF for my investment portfolio? A: When choosing a Covered Call ETF, investors should consider factors such as the fund's expense ratio, underlying assets, historical performance, and the fund manager's strategy. It is also important to understand the risks associated with writing covered call options.

Q: Are Covered Call ETFs suitable for all investors? A: Covered Call ETFs may be suitable for investors seeking income and those comfortable with the risks associated with options trading. However, it is important for investors to assess their risk tolerance, investment goals, and consult with a financial advisor before investing in Covered Call ETFs.