One of the distinct aspects of the YCG Enhanced Fund (YCGEX) is the "Option Enhancement" component. This strategy involves the sale of put and call options with the goal of generating additional income and to enter and exit positions. We view the sale of put options as a way to be compensated to put in a limit order to buy a company we want to own, and the sale of a covered call as a way to be compensated to put in a limit order to sell a company already in the portfolio.
We believe "option enhancement" is a way to mitigate the risk of buying and selling early and enhances the overall investment approach.
We do not use this strategy as a means of generating implicit leverage. In other words, if all put option contracts were to be exercised, the fund will generally have enough cash on hand to purchase the assigned shares.