1. ETF solutions for every investor™
June 2013 HorizonsETFs.comEden Rahim, VP, Portfolio Manager,
Options Strategist
Horizons Investment Management Inc.
Dynamic Covered Call Writing

2. 2A Member of Mirae Asset Financial Group
Thirteen Covered Call Strategies
Horizons Enhanced Income ETFs
Horizons Enhanced Income TSX 60 ETF (HAX:TSX)
Horizons Enhanced Income Equity ETF (HEX:TSX)
Horizons Enhanced Income Energy ETF (HEE:TSX)
Horizons Enhanced Income Financials ETF (HEF:TSX)
Horizons Enhanced Income Gold Producers ETF (HEP:TSX)
Horizons Enhanced Income International Equity ETF (HEJ:TSX)
Horizons Enhanced Income US Equity (USD) ETF (HEA.U:TSX)
Horizons Enhanced US Equity Income ETF (HES:TSX)
Horizons Gold Yield ETF (HGY:TSX)
Horizons Silver Yield ETF (HZY:TSX)
Horizons Crude Oil Yield ETF (HOY:TSX)
Horizons Natural Gas Yield ETF (HNY:TSX)
Horizons Enhanced Income ASX 20 ETF (YMAX:AU)

3. 3A Member of Mirae Asset Financial Group
Attributes of an OTM
Covered Call Strategy
Key advantages:
 Earn ‘rent’ on an equity or commodity portfolio
 Exchange uncertainty of capital gains for greater certainty of monthly premium income
 Higher yield without additional credit risk
 Tapping into another source of tax-efficient total return
 Turns volatility into an asset
 Higher Sharpe ratio due to lower Total Return volatility
 History of securities with embedded Options: Callables, Convertibles, Putables,
Extendables, MBS’s
Things to watch for:
 Still see negative returns in a bear market
 Returns typically lag in bull markets

4. 4A Member of Mirae Asset Financial Group
Covered Call Strategies in Various Markets
Source: Horizons Investment Management Inc.
How can a covered call strategy typically be expected to perform
in various markets?
FOR ILLUSTRATION PURPOSES ONLY

5. 5A Member of Mirae Asset Financial Group
VIX and VIXC Index Values
Source: Bloomberg and the Montreal Stock Exchange, between January 1, 2004 and September 25, 2012.

6. 6A Member of Mirae Asset Financial Group
How Do You Want Your Total Return?
Covered Call ETF
Balanced FundGrowth
100%
Equity Market
Exposure
85%
Equity Market
Exposure
60%
Equity Market
Exposure
40% Bond
Exposure
 Pursuit of
Capital Gains
 Capital Gains
 Options Income
 Dividends
 Capital Gains
 Interest Income
 Dividends
Goal:
For Illustration Purposes Only

7. 7A Member of Mirae Asset Financial Group
Schematic: Nature of
Covered Call Performance
Time
Return
For Illustration Purposes Only

8. 8A Member of Mirae Asset Financial Group
Synthetically: What is a Covered Call?
Covered Call = Equity – Short Call = Higher Yield
Callable Bond = Bond – Short Call = Higher Yield
Convertible = Security + Long Call = Lower Yield
Putable Bond = Bond + Long Put = Lower Yield
MBS =
Long Mortgage –
Prepayment Option
= Higher Yield
Long history of securities embedded options

9. 9A Member of Mirae Asset Financial Group
How Volatility Impacts Strike Determination
For Illustration Purposes Only
STOCK: A B C D
PRICE: 50.00$ 50.00$ 50.00$ 50.00$
DAYS TO EXPIRY 30 30 30 30
IMPLIED VOLATILITY 15% 25% 35% 45%
1 - Σ 2.15$ 3.58$ 5.02$ 6.45$
STRIKE 52.15$ 53.58$ 55.02$ 56.45$
% OUT OF THE MONEY 4.3% 7.2% 10.0% 12.9%
OPTION PRICE 0.24$ 0.36$ 0.49$ 0.63$
OPTION DELTA 0.2 0.2 0.2 0.2
HOW VOLATILITY IMPACTS STRIKE DETERMINATION

10. 10A Member of Mirae Asset Financial Group
Our Approach
 Uses two decades of option writing and hedging expertise
 Systematic, quantitative, and dynamic option writing process
 Industry leading analytics and volumes
 Exchange the low likelihood of high monthly equity returns, in exchange for
more option income returns and capped monthly equity return
 Approach has evolved over past +15 years
 Write on every holding in portfolio
 Sell Strike at the boundary between normal & abnormal monthly returns

11. 11A Member of Mirae Asset Financial Group
A Unique Approach to Buywriting:
How it differs from other covered call strategies
Write on individual Equities vs. Indexes.
Write OTM rather than ATM to allow for ‘good’ volatility
Write only short dated vs. longer term options (theta, delta, vega)
No fixed strike but dynamically determined strikes
Reference implied rather than historic volatility (Logs, fat tails & gaps)
Write on whole portfolio rather than part.
Distribute earned premiums vs. reinvest back into NAV

12. 12A Member of Mirae Asset Financial Group
Trading Abnormal Returns for Income
For Illustration Purposes Only
 The Index aims to preserve “normalized” monthly returns of stocks
while exchanging “abnormal” returns for additional income

13. 13A Member of Mirae Asset Financial Group
Number of Months Per Year
with > +6% Monthly Returns
Source: Bloomberg, Horizons ETFs
Average line (More than 6% Monthly returns)More than 6% Monthly Returns

14. 14A Member of Mirae Asset Financial Group
Covered Call Return Profile
Long
stock
Long stock
+ short call
Spot priceCurrent
spot
The Stock exceeds the target price by more
than the premium → Return is capped
The Stock exceeds the target price
by less than the premium
The Stock does not exceed
the target price before
expiry
For Illustration purposes only
Option
Premium

15. 15A Member of Mirae Asset Financial Group
Advantage of Using an ETF Over D-I-Y
 Few portfolio managers or advisors have extensive experience in option
strategies
 No options license required to buy the Enhanced Income (covered call) ETFs
 Option trading requires specialized skills to execute, monitor, roll, and
manage options positions daily
 Benefit of institutional execution and commission rates
 Selling call options for each individual client portfolio is time consuming and
cost inefficient
 Can capitalize on nuances of market to improve yields

16. 16A Member of Mirae Asset Financial Group
Frequently Asked Questions
 What distinguishes your approach from a traditional fixed strike approach?
 What are the portfolio compositions of the ETFs?
 How do you determine where to write an option?
 Why do yields on covered call strategies fluctuate?
 Is there enough liquidity to do large size trades in the Canadian
options market?
 How are the underlying securities of each ETF selected?
 How does your buy/write strategy differ for the commodity ETFs?

17. 17A Member of Mirae Asset Financial Group
Summary
 Traditional allocations to cash, bonds, stocks or commodities may not be able
to deliver the income and / or risk characteristics that investors demand
 A covered call strategy can deliver:
 Capital appreciation
 Attractive income
 Lower volatility relative to owning just the stock
 Downside protection
 Tax efficiency
 The ETF structure provides low cost, convenient and flexible way to invest
in a covered call strategy

18. 18A Member of Mirae Asset Financial Group
Biography
Eden Rahim is a Vice President,
Portfolio Manager and Options Strategist at
Horizons Investment Management Inc.
As a senior member of the Horizon’s Investment Management Inc. team, Mr. Rahim is
responsible for day-to-day portfolio management of the Canadian listed Horizons Enhanced
Income Covered Call family of ETFs. As of May 30, 2013 there were 12 ETFs under the
following TSX ticker symbols: HAX, HEX, HEF, HEE, HEP, HES, HEJ, HEA.U, HGY, HZY,
HNY, & HOY.
Mr. Rahim has over 15 years experience in trading and hedging options on bonds, currencies,
equities, gold and gold index derivatives.
Mr. Rahim spent the formative part of his career at RBC, first as a Derivative Analyst, and later
as a 5-Star Portfolio Manager for two Growth Funds. Eden has extensive experience in option
hedging and income strategies including covered write and collar option strategies.

19. 19A Member of Mirae Asset Financial Group
Disclaimer
Commissions, trailing commissions, management fees and expenses all may be associated with an investment in
exchange traded products managed by AlphaPro Management Inc. (the “Horizons Exchange Traded Products”). The
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Advisor’), or AlphaPro Management Inc. (the ‘Manager’), although any of the opinions or recommendations found herein
may be reflected in positions or transactions in the various client portfolios managed by the Investment Advisor. All
comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or
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