Review of HMAX: Hamilton Canadian Financials Yield Maximizer

HMAX ETF is a new fund offered by Hamilton ETF. The fund invests in the Canadian banking sector. This fund aims to provide an attractive dividend yield (target 13%) using a covered call strategy. The strategy consists of writing call options on (50% of the portfolio) to collect premiums and maximize monthly distributions. This post discusses the strategy used and compares HMAX to ZWB from BMO (BMO Covered Call Canadian Banks ETF).

This post is available in video format!

How HMAX is able to set such high dividend yield target?

Based on information from the issuer’s website, HMAX offers the potential for higher monthly income due to two key factors: Firstly, HMAX engages in writing covered call options on about 50% of its portfolio. Secondly, the fund currently writes options At The Money (ATM), which sets it apart from similar funds that write options Out of The Money (OTM).


1- HMAX writes covered call options on 50% of the portfolio

As an investor, the first point implies that only 50% of your portfolio will be exposed to potential growth. This portion of the portfolio is subject to a covered call strategy, where the growth potential (capital gain) is replaced by a monthly income generated from dividends and option premiums. These premiums are earned each time the fund sells a call option in the market.

Overall, I consider HMAX to be a hybrid fund. The first 50% resembles a classic dividend fund, where investors can anticipate receiving dividends and experiencing long-term appreciation of the portfolio. On the other hand, the remaining 50% is more conservative, primarily focused on generating income, but with no potential for portfolio appreciation.

CIBC investors' edge

2- The fund is currently writing option At The Money (ATM) whereas similar funds are writing options OTM (Out of The Money).

I encourage you to refer to the table below to grasp the significance of the second point. As observed, the HMAX fund has opted for At The Money (ATM) call options due to their higher profitability compared to Out of The Money (OTM) options. This choice is based on two key factors. Firstly, the premium earned from ATM options is higher than that generated by an OTM strategy. However, it is important to note that the risk of potential loss is also elevated.

In options trading, risk is closely tied to the likelihood of the option being exercised by the buyer. In the case of OTM options, where the strike price is higher than the current stock price, the chances of the option being exercised are low. Conversely, for ATM options, where the strike price is very close or equal to the stock’s current price, the probability of the option being exercised becomes more plausible.


or option
ITM (In the money call option)
Stock price > Strike price
OTM (Out of the money call option)
Stock price < Strike price
CheapLow Low
ATM (At The Money call option)
Stock price = Strike price
Typical expected result when writing a covered call option

Option premium = Intrinsic value + Time value


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BMO Covered call ETF list – Full comparison

How had Covered call ETF’s performed historically?

In historical contexts characterized by bear markets, range-bound markets, and moderate bull markets, a covered call strategy has typically demonstrated the ability to outperform its underlying securities. However, during robust bull markets, when the underlying securities experience frequent rises beyond their strike prices, covered call strategies have historically exhibited slower growth. Nevertheless, even in these bullish phases, investors typically realize moderate capital appreciation alongside the accrual of dividends and call premiums.



The ZWB ETF from BMO sells out-of-the-money (OTM) call options on 50% of the stocks. The OTM strategy caps the return of the written positions at the option strike price until the option expires. Generally, for BMO ETFs, option expiries are 1 to 2 months.

% portfolioOption
Covered call strategy – HMAX vs ZWB; *13% is the target yield

Portfolio allocation

Big Can


Why covered call ETFs are popular?

Covered call ETFs are very popular with Canadian investors. Some of these ETFs managers have billions of dollars under management. Two reasons push investors towards covered call ETFs:

High dividend yield: thanks to the premiums earned when writing call options, the manager under certain conditions can earn premiums and enhance distributions;

Low volatility. Writing a call option is a conservative strategy aimed at reducing volatility;

Great for passive income: if you’re main objective is to achieve high dividend yields and build passive income, then covered call ETFs are a good option. But, remember the high dividend yield comes at a price which very low growth potential.

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Net Asset Value (NAV) is a financial term used to represent the total value of all the assets held by an exchange-traded fund (ETF) after subtracting its liabilities. In simpler terms, NAV reflects the underlying value of the ETF’s portfolio, including all the stocks, bonds, or other assets it holds, minus any expenses and debts it owes. NAV is usually calculated at the end of each trading day.

HMAX Dividend Schedule

HMAX ETF plans to pay monthly dividends. The first distribution is expected to be for the month ended February 28, 2023. The distributions are paid monthly in cash.


HMAX ETF Holdings

Royal Bank of Canada23.1%
Toronto-Dominion Bank20.5%
Bank of Montreal11.5%
Bank of Nova Scotia10.5%
Brookfield Corp10.0%
Canadian Imperial Bank of Commerce6.7%
Manulife Financial6.0%
Sun Life Financial4.8%
Intact Financial4.1%
National Bank of Canada4.1%

HMAX ETF sector allocation

█  Asset Management 10.0%
█  Banks 76.4%
█  Insurance 14.9%

8 thoughts on “Review of HMAX: Hamilton Canadian Financials Yield Maximizer”

  1. Is there fees from Hamilton ETF when share of that EFT are sold. The prospectus indicate when sahre are sale at a value 95% of share value. Does that means Hamilton take 5% of the shares are sold?


      Hi Francis, The management fee is 0.65%. from their website:
      You don’t pay these expenses directly. They affect you because they reduce the ETF’s returns. The ETF’s expenses are made up of the management
      fee, operating expenses and trading costs.
      The ETF’s annual management fee is 0.65% of the ETF’s value
      As this ETF is new, its operating expenses and trading costs are not yet available

  2. Thanks for this good video. Can you please comment on erosion of capital over time with HMAX . It *appears that HMAX’s ATM option strategy might erode capital more than a “safer” OTM fund. I am ok with little or no capital gain when focused on a high income ETF, but the last thing I want is steady erosion of capital over time. Your thoughts on what the ATM option strategy does to put capital at risk is appreciated.

    1. thewyzeinvestor

      Thanks for your comments. As a reminder, I am not a financial advisor or an expert; please research before investing.
      First, only 50% of the portfolio uses the options strategy, so there is some potential growth in the remaining 50%. Only time will tell if the managers can generate some growth with the ATM strategy. It’s an active strategy, so the manager’s experience and abilities will be essential.

  3. All of these ETFs are legal scams, Hyld is a classic one, declining NAV and high pay out which is all destructive return of capital. If you’re using the money for other things such as expenses and don’t reinvest distributions these are basically just legalized Ponzi schemes.

    1. Hi,
      Thanks for your comment Paul. I would not go as far as calling these types of funds a scam! They fit long-term income-oriented conservative investors who don’t mind the dividend taxation impact.
      I believe what’s happening is these types of funds are attracting high dividend yield chasers who don’t realize that they are losing on the growth component of their investment.

  4. The underlying stocks are some of the most stable investments in the history of the stock market, the monthly income is a mix of dividend and capital gains. I could care less what the NAV is as long as I get my income. The dividends payments to the ETF will increase over time as well. I would say that the strategy of investing in stocks with little or no return in the hope that they will be worth much more than when you purchased them is not a great strategy for many of us over age 60. If you invested in RY 50 years ago and earn huge dividends today would you care what the stock price is? Getting regular monthly income is better for many investors sense of security and well being. To say these are scams a nonsense comment.

    1. I echo your sentiments David however my concern is how sustainable is the dividend payout of $.18 a share gonna be for the next 10 years

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