Adding DayMAX™ ETFs to Enhance Income and Diversification (HDIV/HYLD)

The Hamilton Enhanced Canadian Covered Call ETF (HDIV) and the Hamilton Enhanced U.S. Covered Call ETF (HYLD) portfolios have recently been modified slightly to introduce new positions in the DayMAX™ ETFs.

Over the years, portfolio changes within HDIV and HYLD have been made to meet their objective of providing attractive monthly income, while also considering improved diversification and other expected benefits for unitholders. In January 2024, HDIV and HYLD reached an important milestone with the full internalization of their holdings. This change removed all third-party ETFs, brought the top-level management fee of HDIV and HYLD down to 0% (subject to the fees of the underlying portfolio ETFs), and supported increases to monthly distributions.

Following the recent launch of the DayMAX™ ETFs, Canada’s first ETFs using zero-day-to-expiry (0DTE) options, a decision was made to introduce them to HDIV and HYLD, to help deliver higher yields and broader diversification.

DayMAX™ ETFs at a Glance

DayMAX™ ETFs are Canada’s first suite of ETFs to apply daily option strategies. By combining 0DTE options with modest 25% leverage, they aim to deliver higher and more frequent tax-efficient income. The lineup includes:

• Hamilton Enhanced Canadian Equity DayMAX™ ETF (CDAY)
• Hamilton Enhanced U.S. Equity DayMAX™ ETF (SDAY)
• Hamilton Enhanced Technology DayMAX™ ETF (QDAY)

For a full overview, see DayMAX™ ETFs: Seize the Day.

Key Changes to HDIV and HYLD

The portfolio changes involved modestly reducing HDIV and HYLD’s exposure to select YIELD MAXIMIZER™ ETFs and adding positions in DayMAX™ ETFs, specifically CDAY, SDAY, and QDAY.

Both fund families are designed to generate high tax-efficient income, but they differ in how it is achieved. YIELD MAXIMIZER™ ETFs use longer-duration covered calls, while DayMAX™ ETFs employ Zero-Day-to-Expiration (0DTE) options, contracts that expire the same day they are written. This structure allows DayMAX™ ETFs to write options approximately 250 times per year, compared to 12 with traditional monthly contracts, creating more frequent opportunities to generate option premium income. By combining the longer-duration covered calls of YIELD MAXIMIZER™ ETFs with the daily options strategies of DayMAX™ ETFs, HDIV and HYLD are now diversified across time horizons and income streams, monetizing both monthly and daily volatility.

For the full list of updated holdings, please visit the fund pages: HDIV holdings and HYLD holdings.

Expected Benefits of Adding DayMAX™ ETFs to HDIV and HYLD

1. Higher Yields: The introduction of DayMAX™ positions increases the internal portfolio yield of both HDIV and HYLD, supporting their primary objective of providing attractive monthly income.
2. Increased Diversification: By adding DayMAX™ ETFs, HDIV and HYLD expand their holdings to broader exposure, increasing portfolio breadth.
3. Improved Alignment to their Respective Markets: The sector weights of HDIV and HYLD are now closer to those of the Canadian and U.S. markets, respectively, as approximated by the sector weights of the S&P/TSX 60 and S&P 500.

With the addition of DayMAX™ positions, we believe HDIV and HYLD are better positioned to provide attractive yields while maintaining diversified exposure to high-quality sectors. In our view, the integration of daily option strategies through DayMAX™ ETFs complements the YIELD MAXIMIZER™ approach, offering Canadian income investors an expanded toolkit for generating tax-efficient income.

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A word on trading liquidity for ETFs …

Hamilton ETFs are highly liquid ETFs that can be purchased and sold easily. ETFs are as liquid as their underlying holdings and the underlying holdings trade millions of shares each day.

How does that work? When ETF investors are buying (or selling) in the market, they may transact with another ETF investor or a market maker for the ETF. At all times, even if daily volume appears low, there is a market maker – typically a large bank-owned investment dealer – willing to fill the other side of the ETF order (at net asset value plus a spread). The market maker then subscribes to create or redeem units in the ETF from the ETF manager (e.g., Hamilton ETFs), who purchases or sells the underlying holdings for the ETF.

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[1] An estimate of the annualized yield an investor would receive if the most recent distribution remained unchanged for the next 12 months, stated as a percentage of the price per unit on August 29, 2025. The yield calculation excludes any additional year end distributions and does not include reinvested distributions.