4 Best Covered Call ETFs in Canada for Yield (July 2026)
The best covered call ETFs in Canada include ZWC.TO (~0.70% MER), TXF.TO (~0.40%), ZWH.TO (~0.70%), and ZWU.TO (~0.70%). These ETFs generate higher income by selling call options on their holdings, making them suitable for TFSA, RRSP, or non-registered investors seeking enhanced yield with lower growth potential.
Covered call ETFs are designed for Canadian investors who want higher income by using options strategies on top of traditional equity holdings. ETFs like ZWC.TO, TXF.TO, ZWH.TO, and ZWU.TO generate additional yield by selling call options on their underlying portfolios, making them popular for income-focused investors.
The trade-off with covered call ETFs is that while they can produce higher monthly income, they often sacrifice some upside during strong bull markets. ZWC.TO focuses on Canadian banks and energy, TXF.TO targets U.S. technology stocks, ZWH.TO emphasizes U.S. high-dividend companies, and ZWU.TO leans toward utilities for more stable income.
In this guide, we break down the best covered call ETFs in Canada, comparing yield, strategy, fees, and risk so you can decide whether these income-focused ETFs fit your TFSA, RRSP, or non-registered portfolio.
At a Glance: Quick Comparison
Side-by-side snapshot of fees, yield, and returns. Data updates daily.
| ETF | MER | AUM | Yield | YTD | 1Y |
|---|---|---|---|---|---|
Top ZWC.TO BMO Canadian High Dividend Covered Call | 0.65% | $2.4B | 5.66% | +7.70% | +29.34% |
TXF.TO First Asset Tech Giants Covered Call Common | — | $840M | 9.30% | +15.27% | +53.59% |
ZWH.TO BMO US High Dividend Covered Call | 0.65% | $1.1B | 5.86% | +8.79% | +23.94% |
ZWU.TO BMO Covered Call Utilities ETF | 0.65% | $2.2B | 7.07% | +5.68% | +16.92% |
What Is an ETF?
A covered call ETF in Canada is an exchange-traded fund that holds a portfolio of stocks and generates additional income by selling call options on those holdings. This strategy produces option premiums, which are distributed to investors as income, often resulting in higher yields than traditional dividend ETFs.
For example, ZWC.TO (~0.70% MER) focuses on Canadian dividend-paying stocks and applies a covered call overlay to boost yield. TXF.TO (~0.40% MER) targets U.S. technology companies while generating income through options, ZWH.TO (~0.70% MER) applies a similar strategy to U.S. dividend stocks, and ZWU.TO (~0.70% MER) focuses on utilities for more stable income.
Covered call ETFs are commonly used in TFSAs and non-registered accounts for income generation. However, the option strategy limits capital appreciation, and returns depend on both market performance and option premiums. Investors should also consider that income may include a mix of dividends, capital gains, and option income.
The 4 Best ETFs: Ranked & Reviewed
Detailed breakdown of each pick with live data.
BMO Canadian High Dividend Covered Call
$22.24
+7.70% YTD
NA
Returns
YTD
+7.70%
1Y
+29.34%
3Y
+17.94%
5Y
+11.38%
First Asset Tech Giants Covered Call Common
$26.87
+15.27% YTD
Returns
YTD
+15.27%
1Y
+53.59%
3Y
+30.32%
5Y
+17.12%
BMO US High Dividend Covered Call
$26.87
+8.79% YTD
The BMO US High Dividend Covered Call ETF has been designed to provide exposure to a dividend focused portfolio, while earning call option premiums. The underlying portfolio is yield-weighted and broadly diversified across sectors. The Fund screens for securities for dividend growth, sustainability, and option liquidity. The Fund also dynamically writes covered call options. The call options are written out of the money and selected based on analyzing the option's implied volatility. The option premium provides limited downside protection. The underlying portfolio is rebalanced to maintain broad sector diversification and options are rolled forward upon expiry. In addition, ZWH may hold other underlying ETFs, the management fees charged are reduced by management fees paid on the underlying ETFs, thereby avoiding duplication of the management fees.
Returns
YTD
+8.79%
1Y
+23.94%
3Y
+14.18%
5Y
+11.01%
BMO Covered Call Utilities ETF
$11.72
+5.68% YTD
Returns
YTD
+5.68%
1Y
+16.92%
3Y
+11.28%
5Y
+6.37%
Pros & Cons
Pros
- Higher income potential through option premiums in addition to dividends
- Regular monthly distributions from ETFs like ZWC.TO, TXF.TO, and ZWU.TO
- Can provide more stable income in sideways or moderately rising markets
- Exposure to different sectors including Canadian equities, U.S. tech, and utilities
Cons
- Upside is capped during strong bull markets due to covered call strategies
- Higher MERs (~0.40%–0.70%) compared to traditional index ETFs
- Income can vary depending on market conditions and option premiums
- May underperform broad equity ETFs over long periods
Compare These ETFs Head-to-Head
Drill into a side-by-side breakdown of performance, AUM, and yield.
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Frequently Asked Questions
What is the best covered call ETF in Canada?
ZWC.TO is one of the most popular covered call ETFs in Canada because it combines Canadian dividend-paying stocks with an option overlay to boost income. Investors looking for U.S. exposure may prefer TXF.TO, which focuses on technology stocks while generating additional yield through covered calls.
What’s the downside of covered call ETFs?
Covered call ETFs generate income by selling options, which limits their upside when markets rise strongly. While they can provide higher income and lower volatility, they often underperform traditional equity ETFs over the long term due to capped gains.
Are covered call ETFs good for a TFSA?
Yes, covered call ETFs like ZWC.TO and ZWU.TO can be held in a TFSA, where distributions are tax-free. However, investors should focus on total return, as these ETFs prioritize income over growth and may lag in strong bull markets.