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ZWC vs ZWB vs ZWU: how BMO's covered call ETFs really differ

All three are BMO funds that own Canadian dividend stocks and sell calls on them. The big difference isn't the calls. It's the basket: a mix of sectors, only banks, or only utilities.

Comparison · 7-minute read · Updated 2026-10-28

The short answer

ZWC is the BMO Canadian High Dividend Covered Call ETF. It holds a mix of Canadian dividend stocks from several sectors.

ZWB is the BMO Covered Call Canadian Banks ETF. It holds bank stocks.

ZWU is the BMO Covered Call Utilities ETF. Its basket is built around utilities. Check the holdings list: a utilities fund can also hold pipeline or phone companies.

All three sell Call options on what they hold and pay the premium out with the dividends. So the call-selling idea is the same. What you're really choosing is how many eggs sit in one basket. ZWC spreads across sectors. ZWB and ZWU each bet on one.

None of the three is a recommendation to buy or sell, and this page doesn't pick one. Descriptions are as of October 2026. Fund rules change, so check each fund's current page on BMO Global Asset Management's site.

Side by side

The blank-looking rows matter most. Write the numbers down for each fund before you compare. A fund that sells calls on only part of its holdings keeps more of a rally and collects less premium. A fund that sells on all of them does the opposite.

The criteria that decide it

Look at these five, in this order:

1. What it holds. One sector or many. This drives most of the result, up and down.
2. How much of it has calls on it. Part or all. This sets how much of a rally you keep.
3. How far above the price the calls sit. Close to the price collects more and caps sooner. Out of the money calls, further above, leave more room.
4. What the payout is made of. Dividends, premium, or some Return of capital. The fund's annual tax notes show the mix.
5. Its Total return over several years, price plus payouts, next to the plain version of the same stocks.

The quote-screen yield isn't on the list. It tells you what was paid out lately, not what you kept. See distribution rate vs SEC yield.

One bad month for one sector (hypothetical)

This is an illustration, not a trade idea, and not BMO's real numbers. Three people each put $10,000 into one of three made-up funds built like these:

• Mixed fund: a third in banks, the rest spread across other sectors.
• Bank fund: all banks.
• Utility fund: all utilities.

Each collects a made-up $70 of call premium that month.

Then bank stocks fall 15% in a month. Utilities are flat. The other sectors are flat too.

Now flip it. Interest rates jump, and utility stocks fall 12%. Banks and the rest are flat.

Same premium every time. It made up only about 5 to 6 cents of each dollar the bank fund and the utility fund lost. The calls didn't decide who lost. The basket did.

What the calls do in a good month

Say banks rise 8% in a month, and the bank fund sells calls about 3% above the price on all its holdings. It keeps the first $300 of that rise on $10,000, plus the premium. A plain bank fund keeps all $800.

If the fund sells calls on only part of its holdings, it keeps more of the rise. That's why the "share with calls on it" row matters. It's the dial between more payout now and more of the rally later.

Accounts and taxes in Canada

These funds trade in Canada, so they fit in a TFSA, an RRSP or a regular account. US withholding tax is the big problem with US-listed funds in a TFSA. In a Canadian fund, it only touches any US stocks the fund holds, so check the holdings. See US covered call ETFs in a TFSA.

In a regular account, payouts can be a mix of dividends, gains and return of capital, which lowers your adjusted cost base. The fund's T3 slip shows the split. My guide to taxes on selling options in Canada covers the rest. The CRA's T3 pages explain how each amount is taxed.

Doing it yourself instead

You can sell your own covered calls on the same bank or utility stocks. You'd need 100 shares per call, and options approval from your broker; covered calls are widely allowed in a TFSA or RRSP, but permissions differ by broker. In return, you choose the strike, the date and when to sit out after a drop. That's the core of the wheel strategy. For how these BMO funds fit next to JEPI and the YieldMax funds, see how covered call ETFs work.

Questions