Call options give the holder (or buyer) the right to buy the underlying stock at a specified strike price until the expiration date. The seller of the call in turn has the obligation to sell or deliver the underlying security at the strike price until the expiry date.
If you sell call options on your stocks, you’ll pocket low-risk premium income even if your stock just sits there. Selling call options on a stock you own is known as a covered call. This strategy is aimed at generating extra income, but also at lowering risk and volatility.
However, investors who consistently sell covered calls on their portfolios will substantially underperform over time. That’s because the buyers of your calls will always exercise away your big winners.
You can buy a call now, and lock in the future price of a stock. Note, though, that the total price that you’ll eventually pay for the stock will be the cost of the shares, plus the cost of the call option and commissions. If the stock stays around the same price, you lose one commission, plus the cost of the call.
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CANOE EIT INCOME FUND $13 (Toronto symbol EIT.UN; Units o/s: 153.9 million; Market cap: $2.0 billion; Divd. yield: 9.2%; www.canoefinancial.com) is a closed-end fund that invests in a portfolio of dividend paying stocks. Canadian stocks account for 51.2% of its holdings, followed by the U.S. at 40.2%.
Canoe… Read More
High yields, especially in what is still a relatively low interest-rate environment, have lots of appeal for many income investors. But ETF investors should look beyond the historical distribution yield for any danger signs.
The managers of ETFs use various strategies to generate high yields for… Read More
This month we highlight both a copper exchange traded fund from Horizons and a high-income ETF from Harvest Portfolio Group.
HORIZONS COPPER PRODUCERS INDEX ETF $20.20 (Toronto symbol COPP) aims to track the Solactive North American Listed Copper Producers Index. This index invests in copper mining firms that are… Read More
High-yielding ETFs have appeal for income-seeking investors. The income they provide can also provide a buffer in declining markets. However, you need to look closely at the strategies that let those ETFs pay their high yields—and whether they are worth the risks.
Below we look at… Read More
FINANCIAL 15 SPLIT CORP. $9.38 (Toronto symbol FTN; Shares o/s: 28.3 million; Market cap: $265.5 million; Dividend yield: 16.3%; www.quadravest.com) holds shares of 15 big Canadian and U.S. financial companies, including Bank of Nova Scotia, TD Bank, Manulife, Sun Life, CI Financial, and Citigroup.
Financial 15 yields a.. Read More
Investors aiming to beat inflation over time—without taking undue risk—have a variety of options presented by exchange-traded funds. While, looking back is of limited use going forward, here are some of the results from academic studies of the volatility, downside risk, and total return of… Read More
HORIZONS ENHANCED INCOME GOLD PRODUCERS ETF $26.82 (Toronto symbol HEP) invests in an equal-weighted portfolio of North American-listed gold mining companies. The portfolio currently holds 14 stocks with all the top producers such as Barrick Gold and Newmont Corp. represented.
The ETF yields a high 6.8%. However, the dividend income… Read More
A: Harvest Healthcare Leaders Income ETF, $8.29, symbol HHL on Toronto, (Units outstanding: 116.0 million; Market cap: $961.6 million; www.harvestportfolios.com), holds a portfolio of 20 large-cap global healthcare companies, selected by the fund’s manager for their potential to provide attractive monthly income and long-term growth.
The… Read More
A Member of Pat McKeough’s Inner Circle recently asked for his advice on a healthcare fund that engages in covered call option writing and similar trading activities.
Pat likes the stocks held by the fund and its high yield. However, he feels the drawbacks of the… Read More
LIFECO SPLIT CORP. $6.75 (Toronto symbol LCS; Shares outstanding: 5.3 million; Market cap: $35.8 million; Dividend yield: 13.4%; www.quadravest.com) holds shares of Canada’s four largest publicly listed life insurance companies.
These are Sun Life Financial, Manulife Financial, Great-West Lifeco and iA Financial. The company holds the four stocks… Read More
Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' FREE Special Report from The Successful Investor.
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