ZWC: 1 ETF is ALL YOU NEED! | Own the BEST Canadian Dividend Stocks | Covered Call ETF | 8%Yield!

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The covered call strategy is a 0 risk way to enhance the dividend yield of the ETF by using options trading.
Options trading is a tricky affair, more so than trading stocks and is not something I would ever do on my own. With this ETF, it’s all done by the fund manager BMO, who I trust 100%. So how does it work?
So BMO sells “call options” on the dividend stocks inside the ETF. Selling a call option on a stock means that you're selling somebody the option, but not the obligation to take some shares off your hands at a specified price. In return for getting that option, or privilege they pay US, a Premium
So these Premium payments are what boosts the dividend Yield of the ETF. Since the ETF already owns the shares in question, they are called Covered Calls. If they didn't own the shares in question they would be called Naked Calls, and no that's not a joke, that is the official terminology….
Just to be clear, the FUND manager, BMO in this case, is taking care of selling those calls so it's completely transparent to us, the investor.

Let’s use a simple example:
So let's say you own 100 shares of TD Bank and the stock price is currently 70$/share. You can sell a call on those shares to another investor at a specific agreed upon price. Let’s say that price is 72$/share
Now with all options trading there is a time limit for the contract. It's 30 days
So let’s say at the end of 30 days. The stock price of TD is less than 72$. Well in this case the option expires worthless since the stock price is less than the agreed upon price of 72$. So as the seller, we make a premium, which is basically easy free money and we get to keep our 100 TD shares like nothing ever happened.
However if TD stock goes up to 75$/share within the 30 days, the option buyer will definitely exercise his option because he will get 100 TD shares for 72$/share instead of the current market price of 75$/share, so he makes a profit.
This is why investors buy call options. They are making a bet that the stock price will go up significantly in the next 30 days. You might be asking yourself, why don’t they just buy TD shares directly. Well buying call options instead is useful if the share price of a company is really high, like a lot of blue chip stocks. Many people can't even afford 1 share of those companies so buying call options on them is a cheaper alternative if you think the stock price will go up in the near future.
Getting back to our example if the stock price goes to 75$ within 30 days...
On our side, we have to give up 100 TD shares for 72$/share even if they are currently worth 75$/share to fulfill and close the contract…
.
BUT don't forget, that we had the shares at 70$ so we still make a small profit getting rid of them at 72$ and on top of that we still get to keep that Premium the buyer paid us. That is why this is a 0 Risk way to boost your income. Even in the worst case scenario, you make a profit. There is 0 chance of losing any money. This is why the Covered Call strategy is one of the safest and most popular income enhancing strategies.
The 1 downside is that during a strong bull market where stock prices are flying high, you give up some of the stock price upside on the calls that get exercised. How much upside do you give up?...really depends on how many calls the fund manager sells.
BMO’s Covered Call Strategy is pretty conservative as they only sell calls on 50% of their shares and only sell “OUT of the money” calls which means the price they agree to for each contract is always a little higher than the current stock price just like our example.

IN MY OPINION, ZWC is the easiest way to invest in the best Canadian dividend stocks.
Its extremely easy and simple since this one ETF includes the best canadian dividend stocks so there is no need to pick and choose stocks
It provides a consistent monthly income whereas individual stocks usually give out their dividend every 3 months
It provides a really nice yield, higher than if you owned all the stocks individually
The distributions are very tax efficient, even better than eligible dividends, which is what you get from owning the stocks individually
And it performs well during stock market volatility, providing you a small cushion during these stressful times

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