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  5. ENCL: What is your opinion on this new etf. [Global X Enhanced Canadian Oil and Gas Equity Covered Call ETF]
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Investment Q&A

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Q: What is your opinion on this new etf. What type of weighing if it's ok. Looking solely for income.

Is trying to do options for myself a better thing to do? Selling covered calls on say CNQ SU CVE. TY.
Asked by Gerald on December 05, 2023
5i Research Answer:

ENCL uses 25% leverage and a covered call strategy to try to enhance returns and boost yield. Assets are only $2.5M right now. Leverage of course works both ways, and in a very volatile sector such as energy we would expect large swings here in the unit price. The fund lost 2.8% in its first month, though indicated yield is very high. We have mixed views here. We would not suggest  it right now at all on size and short history alone. But we do not mind the strategy itself. The leverage is not for everyone, but with the extra income from options the leverage can work well at times (essentially, options premium will usually be much more than interest expenses). A DIY program can also work, if investors know options and are comfortable. The main difference is that with a DIY program investors have control over individual positions, such as the decision to buy back and cancel an option if they want, and/or sell positions for their own tax purposes. This is not possible for an ETF. But of course, the ETF will have more diversification and professional management, at a small cost.