A covered-call ETF holds stocks, or other assets, and sells call options on some of them; the buyers pay the fund a premium, and that cash goes out to unitholders as distributions, as the Nova Scotia Securities Commission describes it. The catch is that the fund gives up part of the gains when prices rise past the option’s set price. Inside the family, the main choice is how far a fund pushes that trade: how much it covers with calls, how often it writes them, and whether it borrows to invest more. This page explains how they work and compares the main Canadian-listed funds using each issuer’s own figures.
Jump to a category:
On this page: How they work · Kinds · Distributions · The funds compared · How they differ · Limits
How does a covered-call ETF work, and what does it give up?
A call option gives its buyer the right to buy an asset at a set price (the strike) within a set period, and the seller collects a premium for granting it. A covered-call ETF is the seller: it owns the stocks and writes calls either on those same stocks or on an index that stands for them. The premiums come on top of the dividends the stocks already pay, and the Nova Scotia Securities Commission says the fund passes that cash to unitholders as monthly distributions. The Nova Scotia commission adds that the manager keeps selling new options to keep those payments going.
Cboe, which publishes an index of the strategy (BXM), describes it plainly: a position in the S&P 500 against which one-month, at-the-money calls are sold in succession.
What you give up:
- Gains above the strike. If prices climb past the strike, the fund may have to sell the stock or pay out the difference, which caps the upside on the part it wrote calls on. The Montréal Exchange says the writer gives up much of the profit potential while the call is open.
- A small cushion. If prices fall, the Commission says the buyer likely won’t use the option and the fund keeps the premium, and the Montréal Exchange calls that a small cushion against a drop.
- Premiums can fall short. Fidelity warns that the premiums may not make up for the gains the fund would have had by simply holding the stocks.
The design changes the trade. A higher strike leaves more room to rise but brings in less premium, and calls with shorter terms can bring in more. The Exchange says the strategy suits a steady or slightly rising market.
What kinds of option-income ETFs are there?
The table groups the funds into four kinds, by how hard each one leans on options and borrowing.
Covered call. The classic version: stocks plus calls on part of the portfolio. Harvest caps the calls on its Income Leaders ETFs at 33% of holdings to keep room for growth, while BMO says its fund ZWC writes calls “dynamically” and that the premiums give some downside protection. Global X’s USCC and QQCC each hold one index ETF, on the S&P 500 or the Nasdaq-100, and Global X reports the average share covered by calls on its fact sheets. The underlying doesn’t have to be stocks: Harvest’s HPYT holds ETFs of long US Treasury bonds and writes calls on up to 100% of them, and Hamilton’s RMAX runs an active covered-call strategy on a portfolio of Canadian and US REITs.
Covered call with leverage. The same idea plus borrowing. Harvest’s Enhanced Income ETFs keep the 33% cap and add up to 25% leverage. Hamilton’s HDIV borrows about 25% and holds mainly sector covered-call ETFs, and Harvest’s HHIS holds Harvest single-stock covered-call ETFs that use about 25% leverage.
Yield maximizer. Hamilton’s name for HMAX, UMAX and similar funds; the HMAX and UMAX pages each describe a share covered by calls that is flexible, adjusted, in Hamilton’s words, “to achieve target yield and preserve upside”. HMAX and UMAX don’t borrow.
Daily options. Hamilton’s DayMAX funds write calls that expire the same day; Hamilton says this aims at “higher and more frequent income,” with about 25% leverage on top.
Two related products are not in the table. YieldMax’s GMEY, for example, is listed on NYSE Arca in the US, according to the issuer’s site; see US-listed ETFs from Canada. Buffer ETFs use options for a different goal: BMO describes its buffer ETF as aiming to match a US large-cap index up to a cap while absorbing the first 15% of a fall, over about a year that you must hold through, and says the fund may use options on the ETF it tracks for that “target outcome strategy”. BMO describes its buffer ETF’s options as part of a target outcome strategy, not an income strategy, so it’s left out of this table..
What is a distribution made of, and why isn’t it the return?
A covered-call fund’s payout can mix dividends or interest, option premiums and return of capital; BMO names each of these as possible parts of a distribution. Harvest says that when a fund pays out more than it earns, the difference is a return of capital.
The “yield” issuers show is a distribution rate: the latest regular payout, annualized, divided by the unit price or net asset value, leaving out year-end extras. It isn’t the total return, which counts the change in unit value plus reinvested distributions. BMO puts the gap plainly: if a fund pays out more than it earns, “your original investment will shrink”.
In a non-registered account, distributions are taxable. A return of capital is the part of a fund's distribution that is more than its earnings; it isn't taxed in the year you receive it but reduces the adjusted cost base (ACB) of your units, which generally means a larger capital gain or smaller capital loss when you sell, and if it takes the ACB below zero the negative amount is a capital gain for that year. How ETFs are taxed explains this, and our guides to the T3 slip and adjusted cost base cover the details. For how covered-call funds compare with plain dividend funds, see dividend ETFs in Canada.
The main covered-call and option-income ETFs compared
The table covers option-income funds from BMO, Global X, Hamilton and Harvest, each with an MER and source published by its issuer, grouped by kind. Other issuers’ option-income ETFs, US-listed funds and buffer ETFs aren’t in it. A covered call gives up part of the gains above the strike on the portion of the fund it covers (how that works).
Covered call
7 funds, MERs from 0.47% to 0.86%
| Fund | What it holds | Leverage | MER | Distributions |
|---|---|---|---|---|
| ZWBBMO Covered Call Canadian Banks ETF | Canadian bank stocks, covered calls | None | 0.72% | Monthly |
| ZWCBMO Canadian High Dividend Covered Call ETF | Canadian dividend stocks, covered calls | None | 0.72% | Monthly |
| ENCCGlobal X Canadian Oil and Gas Equity Covered Call ETF | Canadian oil and gas stocks, covered callsShare covered by calls: 28.10% on average (September 30, 2026) | None | 0.76% | Monthly |
| ZWUBMO Covered Call Utilities ETF | North American utilities, covered calls | None | 0.71% | Monthly |
| ZWHBMO US High Dividend Covered Call ETF | US dividend stocks, covered calls | None | 0.71% | Monthly |
| QQCCGlobal X NASDAQ-100 Covered Call ETF | Nasdaq-100 stocks, covered callsShare covered by calls: 44.65% on average (September 30, 2026) | None | 0.86% | Monthly |
| USCCGlobal X S&P 500 Covered Call ETF | S&P 500 stocks, covered callsShare covered by calls: 44.72% on average (September 30, 2026) | None | 0.47%Lowest in group | Monthly |
Covered call with leverage
3 funds, MERs from 0.97% to 1.87%
| Fund | What it holds | Leverage | MER | Distributions |
|---|---|---|---|---|
| HDIVHamilton Enhanced Canadian Covered Call ETF | Canadian sector covered call ETFs | 25% (about 1.25x) | 0.97%Lowest in group | Monthly |
| HHISHarvest Diversified High Income Shares ETF | Harvest single-stock covered call ETFs | 25% (about 1.25x) | 1.72% | Monthly |
| HYLDHamilton Enhanced U.S. Covered Call ETF | US sector covered call ETFs | 25% (about 1.25x) | 1.87% | Monthly |
Higher-coverage (yield maximizer) funds
2 funds, MERs all 0.77%
| Fund | What it holds | Leverage | MER | Distributions |
|---|---|---|---|---|
| HMAXHamilton Canadian Financials YIELD MAXIMIZER ETF | Canadian financial stocksShare covered by calls: a flexible share (Hamilton's "flexible coverage ratio") | None | 0.77% | Monthly |
| UMAXHamilton Utilities YIELD MAXIMIZER ETF | Utility-services stocks, Canada and USShare covered by calls: a flexible share (Hamilton's "flexible coverage ratio") | None | 0.77% | Monthly |
Daily-options funds, with leverage
2 funds, MERs from 1.04% to 1.10%
Issuer-published figures. MER as of BMO: the latest audited year (fact sheet of August 31, 2026) or the latest audited year (fact sheet of September 30, 2026); Global X: June 30, 2026; Hamilton: per ETF Facts dated September 10, 2026 or per ETF Facts dated January 8, 2026 or per ETF Facts dated June 18, 2026; Harvest: June 30, 2026 (each issuer's latest reported MER). Each ticker links to the issuer's page, which has the current price, holdings, distributions and performance.
“Share covered by calls” appears where the issuer states it; Global X gives an average for the period, and Hamilton describes a flexible share for HMAX and UMAX. Leverage is the borrowing each issuer states. There are no yield or return columns: past results don’t predict future ones, and each ticker links to the issuer’s page, where the current distribution rate is published.
How do the funds differ?
How much is covered. Global X reports 44.72% on average (September 30, 2026) for USCC and 44.65% on average (September 30, 2026) for QQCC; Harvest caps its Income Leaders at 33%; Hamilton’s yield maximizers set the share to reach a target payout.
Borrowing. HDIV, HYLD, CDAY and QDAY borrow about 25%; HHIS’s leverage comes through the single-stock ETFs it holds. The ETF Facts for HDIV says borrowing can speed up losses in some markets.
Fees. The MER is 0.97% for HDIV, 1.72% for HHIS and 1.87% for HYLD, three funds that hold other covered-call ETFs and borrow, against 0.72% for ZWC and 0.47% for USCC.
Payout schedule. The DayMAX funds, CDAY and QDAY, pay semi-monthly; the other funds in the table pay monthly.
Hamilton’s three lines
Hamilton runs three of the four kinds: HDIV and HYLD are its Enhanced covered-call funds, HMAX and UMAX its yield maximizers, CDAY and QDAY its DayMAX funds. For HDIV, HYLD, CDAY and QDAY, Hamilton says the roughly 25% leverage is cash borrowed from a Canadian financial institution, not derivatives, and HDIV’s ETF Facts caps it at about 25% of net asset value. Hamilton rates both HMAX and CDAY medium risk.
Who the issuers say the funds are for. Each fund’s ETF Facts has a “Who is this ETF for?” section. One line from each kind:
- ZWC (covered call): BMO says investors who “are looking for income” and want Canadian dividend stocks “with an income enhancement”.
- HHIS (with leverage): Harvest’s ETF Facts for the fund says investors looking for “a portfolio of single stock ETFs and high income,” and rates its risk high.
- HMAX (yield maximizer): Hamilton says investors who seek “regular (monthly) dividend income, supported by a covered call strategy”.
- CDAY (daily options): Hamilton says investors who seek “frequent dividend income” and want “a modestly levered exposure (~125%)”.
What don’t covered-call ETFs do?
- Keep the gains above the strike. On the covered part, the rise past the strike goes to the option buyer.
- Protect you in a big fall. The premium is a small cushion; the Montréal Exchange puts the worst case as the holding becoming worthless.
- Guarantee the payout. BMO says distributions can change or stop.
- Limit the damage from borrowing. Leverage can make a fund lose value faster.
- Guarantee your money. ETFs carry no guarantee, and they aren’t covered by CDIC deposit insurance.
- Stay simple at tax time. In a taxable account, you get a T3 slip; how return of capital changes your cost base is on how ETFs are taxed.
Where to go next
Sources
The figures and rules on this page come from these sources, last checked against them between September 25, 2026 and October 13, 2026. How we check facts.
- BlackRock iShares: Tax Information Centre - Distributions & Tax FAQs | BlackRock Canada
- BMO: ETF FACTS
- BMO Global Asset Management: ZWC - Factsheet
- BMO Global Asset Management: ZWB - Factsheet
- BMO Global Asset Management: ZWU - Factsheet
- BMO Global Asset Management: ZWH - Factsheet
- Canada Revenue Agency: Tax treatment of mutual funds
- Global X: Global X S&P 500 Covered Call
- Global X: Global X NASDAQ-100
- Global X: Global X ETF Roadmap
- Hamilton ETFs: HDIV – Hamilton ETFs
- Hamilton ETFs: CDAY – Hamilton ETFs
- Hamilton ETFs: HYLD – Hamilton ETFs
- Hamilton ETFs: QDAY – Hamilton ETFs
- Hamilton ETFs: HMAX – Hamilton ETFs
- Hamilton ETFs: UMAX – Hamilton ETFs
- Harvest ETFs: Covered Call Option ETFs
- Harvest ETFs: HPYT | Harvest Premium Yield Treasury ETF | Harvest ETFs
- Harvest ETFs: HHIS - Harvest Diversified High Income Shares ETF - Harvest High Income Shares