Pass on this ETF: CI First Asset Tech Giants Covered Call ETF

Article Excerpt

CI FIRST ASSET TECH GIANTS COVERED CALL ETF $20.16 (Toronto symbol TXF) invests in what it sees as 25 of the most innovative U.S. technology companies. These include Apple, Alphabet, Microsoft, Nvidia, Adobe and Amazon. First Asset Tech Giants has a very high 9.3% yield. However, the ETF’s portfolio does not provide enough dividend income to cover the fund’s management expenses and fees, plus that high yield. To make up the difference, it has to make capital gains by trading the portfolio’s securities. It also aims to raise its returns by writing call options on its securities. Selling call options generates an income stream. However, it also tends to diminish any capital gains its portfolio might generate. When the stocks that the ETF owns go up, holders of the call options it has sold will exercise those options and buy the stock at the agreed-upon price. Meanwhile, the ETF will want to hold on to its losers—stocks it owns that are going down—to offset its obligations…