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Covered calls on XIU, the TSX 60 ETF

XIU has listed options in Canadian dollars, so you can sell covered calls on it in a TFSA with no currency swap. The premium is small, and it does little when the whole market falls.

Options guide · 9-minute read · Updated 2026-10-28

The short answer

XIU is an ETF that holds the 60 large Canadian companies in the S&P/TSX 60 index. It has listed options on the Montreal Exchange, priced in Canadian dollars. If you own XIU units, you can sell a Covered call on them, in a regular account, a TFSA or an RRSP.

It works like a covered call on any stock. You collect a premium now. You agree to sell your units at the strike. You keep the full drop if the market falls.

This isn't a recommendation to buy or sell XIU. This page is part of my map of selling options in Canada.

How XIU options work

• Contract size. Montreal Exchange options usually cover 100 units. Check the contract specs on m-x.ca before you trade (this page is as of October 2026).
• Currency. Canadian dollars. No converting, no conversion fee.
• Exercise style. The buyer can exercise before expiry. That matters around the fund's distribution dates (see below).
• Expiries and strikes. Fewer expiry dates than the busiest US funds, and strikes are often spaced wider.

XIU vs SPY: the liquidity gap

SPY options, on the biggest US index fund, are some of the most traded options in the world. XIU's trade far less. Here's what that means when you sell one.

The wide gap costs you. If the bid is $0.40 and the ask is $0.60, selling at the bid gives up $0.10 a unit, or $10 a contract, on every trade. Put in a limit order near the middle and wait. Check the Open interest on your strike, too. A strike nobody trades is hard to close early.

A worked example where the market keeps falling (hypothetical)

All numbers are made up. (An illustration, not a trade idea.)

You own 100 units of XIU, bought at $40. That's $4,000, in your TFSA.

Month 1. You sell one call with a $42 strike, about 45 days out, for $0.50. You collect $50.

Then the Canadian market drops. At expiry, XIU is at $35. The call expires worthless.

The premium covered one-tenth of the drop. That's the normal size of the cushion.

Month 2. XIU sits at $35. A call at $42 now pays almost nothing. Here's the trap. A $36 call pays a better $0.60, or $60. But $36 is below your $40 cost.

You sell it. The market bounces. XIU ends at $39, and your units are called away at $36.

Compare that with doing nothing after month 1. You'd hold 100 units at $39, down $100 on the units, plus the $50 premium: −$50.

The second call turned a small paper loss into a locked-in −$290, and you're out of the fund just as it recovered. Nothing went "wrong" with the option. The strike did it.

The ex-dividend trap

XIU pays a distribution a few times a year. On the Ex-dividend date, the unit price drops by about the amount paid.

If your call is in the money and has little time value left, the buyer may exercise the day before to collect the distribution. You get assigned before expiry. That is called Early assignment. Your units are gone, and so is the distribution you were counting on.

Hypothetical numbers: XIU at $43, your call at $42, the distribution $0.25 a unit. That's $25 on 100 units that goes to the call buyer instead of you.

To check, look at the fund's distribution dates on the issuer's page. Then look at your call the week before. If it's in the money and its price is close to "XIU minus the strike," early exercise is likely. You can buy it back, roll it, or accept the sale. See early assignment before a dividend.

XIU in a TFSA or RRSP

XIU and its options are in Canadian dollars, on a Canadian exchange. That makes them simple in a registered account. Covered calls are widely allowed in a TFSA or RRSP. Cash-secured puts depend on the broker, and options permissions differ by broker.

One TFSA point from the example: the −$290 can't be claimed as a loss. When you take money out, you get that amount of room back the next year. The $290 you lost never comes back as room.

If you'd rather own the market without capping it, there's no rule that says you must sell calls. The wheel strategy and covered calls are tools, not duties.

Before you sell a call on XIU

1. Write down what you paid per unit. That's your floor for strikes.
2. Check the bid, the ask and the open interest on the strike.
3. Check the next distribution date against your expiry.
4. Fill in the outcome table with XIU 15% lower. Can you hold through that?
5. Decide now what you'll do after a drop: wait, not chase.

Questions