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DANGERS of Covered Call ETFs

Updated: Mar 17, 2023

Are you drawn to high-yield dividend ETFs because of the juicy high yield and wondering if it's the right choice?

Do you know how those juicy dividends work and the downside of those juicy dividends in a bull market?

Are you wondering if covered call ETFs are for you?

Those are good questions and I wondered about them for a long time too so that's why I did some massive digging for you.

I dug up a lot of interesting content about covered call ETFs and some of the results may surprise you.

As you probably know, I love collecting passive income every single month. Who doesn't like moola?

But while covered call ETFs provide very enticing moola, those benefits come at a cost.

In today's video, I share the pros and cons of covered call ETFs, the dangers of chasing yield, and what it can cost you.

There are good reasons for investing in covered call ETFs and I share whose it is for and whose it is not for.


Pros and Cons of Covered Call ETFs

  • Pros:

    • High yields (over 6%), pay monthly income.

    • Work for all accounts (can buy in your TFSA, RRSP)

    • Great for sideways or bearish markets as covered call premiums will be good because the pricing of options contracts is partly set by the volatility of the market

  • Cons:

  • Covered call ETFs underperform in the bull market

  • Covered call ETFs most of the time pay monthly distributions but are not always guaranteed

  • Don't need to do a lot of research

Who it is for

  • Those in their retirement looking to preserve their wealth and not grow their wealth

  • Those looking for predictable side income

  • Covered call ETFs thrive in a volatile bearish market and protect you from the downside

  • Covered Call ETFs are good for a basket of stocks that are not going anywhere

Downsides of Covered Call ETFs & Whose it NOT for

  • Not for those in the wealth accumulation stage

  • Require management fees (<1% as they are actively traded ETFs)

  • If you like having control of what you do with your money and knowing what companies you are investing in


  • QYLD - Tracks top 100 companies in the NASDAQ

  • ZWB - tracks top dividend bank stocks in Canada

  • The danger of chasing high-yield ETFs is that you are letting go of a lot of upside in a bull market


00:00 - Intro

01:36 - What is Covered Call ETFs

5:54 - Pros and Cons with Covered Call ETFs

8:39 - Who it is For

10:05 - Downsides of Covered Call ETFs and Who it NOT for

12:05 - Examples


If collecting passive income is your thing and covered call ETFs are not your thing, I share a very powerful strategy for investing in stocks that don't or take a lot of time nor brain cells. Check out my free guide below.

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