There is perhaps no controversy in the investing world more contentious than active versus passive equity investment management. Members of both camps constantly argue that their way is unequivocally the best, despite real-world results that support one side’s argument one year and the other’s the next.
Blackrock, the world’s largest money manager, is overhauling its actively managed equities business. They are cutting jobs, dropping fees and relying more on computers to pick stocks. This is a clear indication how difficult it has become for humans to beat the market.
“BlackRock CEO Larry Fink has sometimes expressed disappointment in the performance of the company’s actively managed stock funds, and he has pivoted increasingly to focusing on the company’s data-driven “Scientific” equity teams.”
Most investors seem to be in either the active or passive camp, few use both methods. For years, I have been in the active camp because I use options to make money during up and down markets. However, providers of exchange traded funds (ETF’s) have evolved beyond just offering low cost sector and index funds.
The growing popularity of ETFs have increased competition among providers to attract investors to purchase their products. I have notice an increase in the number of products that include covered call and also some put right options.
A Partial list of Covered Call ETFs
Advisor Shares STAR Global Buy-Write ETF (VEGA) CBOE S&P 500 Buy Write Index ETN (BWV) Credit Suisse Gold Shares Covered Call ETN (GLDI) Credit Suisse Silver Shares Covered Call ETN (SLVO) First Trust High Income ETF (FTHI) First Trust Low Beta Income ETF (FTLB) Horizons S&P 500 Covered Calls ETF (HSPX) Recon Capital NASDAQ 100 Covered Call ETF (QYLD) S&P 500 BuyWrite Portfolio ETF (PBP) BMO Covered Call Canadian Banks ETF (ZWB-TSX) BMO Covered Call Dow Jones Industrial Average Hedged to CAD ETF (ZWA-TSX) BMO Covered Call Utilities ETF (ZWU-TSX) BMO US High Dividend Covered Call ETF (ZWH-TSX) First Asset Can-60 Covered Call ETF (LXF-TSX) First Asset Can-Energy Covered Call ETF (OXF-TSX) First Asset Can-Financials Covered Call ETF (FXF-TSX) First Asset Can-Materials Covered Call ETF (MXF-TSX) First Asset Tech Giants Covered Call ETF (CAD Hedged) (TXF-TSX)
A key advantage of ETFs with covered call option writing is investors have some downward protection during these uncertain times. Plus you don’t have to be approved by your financial institution to trade options. Keep in mind that the management expensive ratios are going to be higher than index funds and these ETFs are also fairly new so it may be difficult to evaluate their past returns.
Disclaimer: These are not recommendations, do you own research before investing.