Covered call ETF income calculator: the payouts and the price, side by side
A big payout rate sounds great. But what is the share price doing while the fund pays you? Put in the rate and a price change, and watch both numbers side by side.
| Year | Payout that year | Your shares are worth | Payouts so far | Shares + cash payouts |
|---|
How it works: each year the fund pays you the distribution rate times what your shares are worth at the start of that year. Then the share price moves by the change you entered. If you take the payouts as cash, your shares stay the same number and their value follows the price. If you reinvest, each payout buys more shares at the year-end price. Your total is the shares plus any cash you took out. Real funds pay monthly and their payouts change; this keeps one payout a year so you can check every number by hand. Fees inside the fund are already in its price. Taxes are left out.
Why a big payout can still shrink your money
A covered call ETF sells calls on the stocks it holds. The premium it collects is what it pays out. But when the market jumps, the calls cap the fund's gain. When the market drops, the fund falls almost as far. Over years, that can drag the share price down. Each payout is then a slice of a smaller pile, so the payouts shrink too. That's why this page shows the payouts and the share value side by side. A high rate on its own tells you very little. To see how the fund's calls work, read covered call ETFs vs doing it yourself.
Cash or reinvest: what the switch shows
Flip the box above between cash and reinvest. Taking cash shows the trap most clearly: you watch the payouts come in while the shares you own are worth less each year. Reinvesting hides it a little, since new shares top up the falling ones. Either way, if the price keeps falling faster than the fund pays, your total goes down. Selling covered calls yourself, as in the wheel strategy, lets you pick the strike and the stock. That's more work, but you see every trade. Holding the fund in a TFSA, RRSP or IRA changes the tax, not this math.
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