Q: In ref. to TK's question July 10 I am curious why you would suggest ZWB over HMAX for an income-based portfolio? I looked hard at both, for the same reason as TK, and chose HMAX. Just counterchecking my decision. Thanks, James
5i Research Answer:
While we like HMAX for its high yield (~15%), it mainly sells in the money calls, however, which garner a higher premium, but also come at the cost of reduced potential for upside capital appreciation. ZWB, on the other hand, mostly sells out of the money calls, which have a lower premium (hence ZWB's lower yield), but it has better upside potential in the event of a sector rally. For a balanced approach, we like ZWB for its solid yield and potential for capital appreciation. We continue to like HMAX, but we prefer ZWB's higher AUM of $2.9B vs. HMAX at $394.7M.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWB.