Q: Two part question:
What are the major differences between these two covered call utilities etf's? Wondering why/how UMAX has ~2X dividend yield?
Would it be possible to suggest equivalent covered call etf(s) for US market?
Thank you.
What are the major differences between these two covered call utilities etf's? Wondering why/how UMAX has ~2X dividend yield?
Would it be possible to suggest equivalent covered call etf(s) for US market?
Thank you.
5i Research Answer:
UMAX sells at-the-money call options, which get higher premiums than out-of-the-money. It typically sells options on half of its portfolio. ZWU sells out of the money options. While yield is much higher, UMAX pays out a larger portion of return of capital. If we look at one year total returns, UMAX is 5.33% and ZWU is 11.33%. When a sector rallies an at-the-money strategy is going to underperform.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ZWU.