Covered call ETFs were relegated to the sidelines for a while as investors shunned them in favor of growth and tech ETFs during the low-interest rate bull market of the last decade. 

This all changed in 2022, where the high-volatility, side-ways trading market conditions proved to be the perfect setup for a covered call strategy. Income hungry Canadian investors poured money into these ETFs as long-only equity and bond strategies both faltered. 

Today, the number of covered call ETFs in Canada has drastically increased. Multiple ETF managers, from the Big Banks to boutique firms have launched a rather extensive lineup of ETFs. 

Today, we'll be profiling three of the larger and more prominent ETF managers along with their covered call ETF offerings. Stay tuned for part 2, where we will cover some of the smaller firms!

A refresher on covered calls

Covered call ETFs are a long equity strategy that also seeks to provide above-average levels of income. These funds hold a portfolio of underlying assets, commonly equities, and then employ an options writing strategy by selling calls on the underlying. 

By doing so, these ETFs essentially convert some or all (depending on the percentage of the covered call overlay) of the ETF's upside potential into an immediate cash premium. This is aggregated and distributed to investors monthly. 

For an in-depth recap of covered calls, I suggest reading this article, which goes into the mechanics of how these ETFs work and their risk/return profile in-depth. For those familiar with the covered call strategy, here are a few trends I have observed recently for these ETFs:

• More and more covered call ETF providers are limiting the options overlay to 33% or 50% of the ETF's underlying to ensure better participation in upside returns. 
• Many ETF providers are actively managing their covered call ETFs as opposed to using a systematic strategy to capitalize on volatility and other variables.
• Covered call ETFs are expanding beyond Canadian equities to also cover commodities, foreign equities, cryptocurrencies, and even single stocks. 

BMO Global Asset Management

BMO currently has one of the most extensive covered call ETF lineups in terms of assets under management, or AUM and the number of ETFs available. Most of their covered call ETFs have a Canadian equity focus like banks, utilities, or dividend stocks. They also have a few for U.S. and European dividend equities, sectors, and indexes. Some of these ETFs come in currency-hedged versions. 

• BMO Covered Call Canadian Banks ETF (ZWB)
• BMO Covered Call Utilities ETF (ZWU)
• BMO Canadian High Dividend Covered Call ETF (ZWC)
• BMO US High Dividend Covered Call ETF (ZWH)
• BMO Europe High Dividend Covered Call ETF (ZWP)
• BMO Covered Call US Banks ETF (ZWK)
• BMO Covered Call Dow Jones Industrial Average ETF (ZWA)
• BMO Global High Dividend Covered Call ETF (ZWG)
• BMO Covered Call Technology ETF (ZWT)

CI Global Asset Management

A leader in the Canadian fund industry, CI GAM's suite of covered call ETFs represents a drop in the bucket when it comes to the breadth of their overall offerings. Nonetheless, the firm's covered call ETFs are unique among competitors due to their focus on large-cap equities, hence the "Giants" moniker in their names. Many of these ETFs come in both currency-hedged and unhedged versions. 

• CI First Asset CanBanc Income Class ETF (CIC)
• CI Gold+ Giants Covered Call ETF (CGXF)
• CI Tech Giants Covered Call ETF (TXF)
• CI U.S. & Canada LifeCo Income ETF (FLI)
• CI Energy Giants Covered Call ETF (NXF)
• CI Health Care Giants Covered Call ETF (FHI)

Horizons ETFs

Best known for their suite of tax-efficient total return swap-based ETFs and BetaPro leveraged ETFs, Horizons also has some actively managed covered call ETFs to offer. A unique fund among their lineup is the Horizons Gold Yield ETF (HGY), which provides covered call exposure for gold. Asides from HGY, there's a good selection of Canadian and U.S. index and equity sector ETFs available. 

• Horizons NASDAQ-100 Covered Call ETF (QQCC)
• Horizons Equal Weight Canadian Bank Covered Call ETF (BKCC)
• Horizons Canadian Large Cap Equity Covered Call ETF (CNCC)
• Horizons Canadian Oil and Gas Equity Covered Call ETF (ENCC)
• Horizons Gold Producer Equity Covered Call ETF (GLCC)
• Horizons US Large Cap Equity Covered Call ETF (USCC)

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.