Investing · ETF deep dive
ZWB BMO Covered Call Canadian Banks ETF
The category’s biggest fund at $4.4B and its longest track record: the Big Six banks with BMO’s out-of-the-money call overlay, distributing 6.15% monthly since 2011.
Best for: Bank-dividend loyalists who’d rather have the premium income than the next leg of bank-stock upside
Pros
- Largest covered-call ETF in Canada ($4.4B) with a 15-year live history through multiple rate cycles
- The Big Six and nothing else — the most-watched, most-liquid option market in Canada underneath
- Monthly distribution just raised 25% — $0.12 to $0.15/unit in May 2026 — vs roughly 4% yield on the unwritten banks
Cons
- One sector, six names — a bank-capital or housing shock hits every holding at once
- Capped participation when bank stocks rip (and they periodically do)
- 0.72% MER vs 0.28% for ZEB, the same banks without the overlay
What's inside ZWB
| Underlying fund | Weight |
|---|---|
| BMO Equal Weight Banks ETFZEB | 20.8% |
| Toronto-Dominion BankTD | 13.7% |
| Royal Bank of CanadaRY | 13.6% |
| Bank of MontrealBMO | 13.5% |
| Bank of Nova ScotiaBNS | 13.1% |
| CIBCCM | 12.8% |
Canadian banks — effectively the Big Six, partly held via BMO’s equal-weight banks ETF (ZEB) (Top-holdings table, Jun 9, 2026) · holdings as of June 9, 2026
The deep dive
ZWB is the straightforward trade: own the Big Six — partly directly, partly through a 20.8% sleeve of ZEB, BMO’s equal-weight banks fund, which holds the same six names — and sell out-of-the-money calls on at least half the book. Bank stocks suit the strategy unusually well: heavily-traded options, fat dividends underneath, and a long history of grinding sideways between revaluations, which is exactly the market where call writing earns its keep. When banks rally hard instead, ZWB lags by design — the written half surrenders the move above the strikes.
Running since January 2011, it has paid its monthly distribution through the oil crash, the pandemic and the 2022–23 rate shock — and raised it 25% in May 2026, to $0.15/unit, a 6.15% stated yield. The choice it poses is clean: ZEB at 0.28% keeps all the upside and pays the banks’ own ~4%; ZWB at 0.72% pays ~2% more now and gives up part of later. For a retiree spending the distribution, that trade can be rational; for an accumulator reinvesting it, it rarely is.
The rest of the field
The rest of the field, one line each:
- ZWC — the broad-Canada book — 72 dividend payers at 6.48%
- ZWU — utilities, telecoms and pipelines at 7.09%, US sleeve CAD-hedged
- HMAX — Canadian financials yield-maximized to 11.71%
- UMAX — utilities-plus (rails, pipes, telecoms) at 13.40%
- HTA — global tech with a 33% write cap, 8.85%
- HHL — US healthcare income at 10.24%, since 2014
Frequently asked questions
What does ZWB hold?
ZWB holds The Big Six Canadian banks (partly via ZEB) with covered calls on 50%+ of the book — led by BMO Equal Weight Banks ETF (ZEB) at 20.8%, Toronto-Dominion Bank (TD) at 13.7%, Royal Bank of Canada (RY) at 13.6% (as of June 9, 2026). Looking through to the securities level, that's effectively the Big Six banks — the 20.8% ZEB sleeve is itself the equal-weight Big Six in one ticker. Sector mix: Canadian banks — effectively the Big Six, partly held via BMO’s equal-weight banks ETF (ZEB) (top-holdings table, jun 9, 2026). Weights drift between rebalances — dynamic covered calls — out-of-the-money, written on at least 50% of the portfolio (bmo suite-wide), expiries generally 1–2 months.
What does ZWB cost?
Currently 0.65% management fee; 0.72% published MER (page as of Jun 9, 2026). Covered-call ETFs are the most expensive mainstream category in Canada — the major funds run 0.71%–0.99% MER, versus 0.11%–0.66% for plain dividend ETFs, because you're paying for an active options program. See the full comparison, and what a ~0.8% fee compounds into with the MER calculator.
Is ZWB's distribution yield the same as a dividend yield?
No — and this is the single most important thing to understand about covered-call funds. ZWB's distribution is the underlying stocks' dividends plus option premium, the cash received for selling away part of the portfolio's upside. The yield is real monthly cash flow, but it is not "income the businesses earned" — part of it is the market paying you today for growth you won't receive later. Providers state the trade plainly (Hamilton: "writing options caps the upside growth potential of the portfolio that is covered, in exchange for a higher yield"). Tax-wise, providers state that option premiums are generally treated initially as capital gains, and distributions often include return of capital, which reduces your adjusted cost base — check the fund's annual tax-character breakdown and consider professional advice for large non-registered positions. The covered-call guide walks the full mechanics.
The bottom line
The defining fund of the category — if covered-call investing has a blue chip, this is it. Just be clear you’re renting out bank-stock upside, not discovering free yield. Want the same idea across more sectors? ZWC.
This page is for educational purposes only and is not investment advice. Fund facts were verified at BMO ETFs's published fact sheets and product pages on June 10, 2026; holdings and weights are point-in-time and drift between rebalances; published MERs may lag recent fee changes (page as of Jun 9, 2026). We deliberately do not compare or project returns. Read the fund facts document before buying. See our methodology.