Covered call ETFs have quickly grown in popularity as investors search for ways to boost yield in uncertain markets.
These funds package options strategies into the exchange-traded fund (ETF) format, giving everyday investors access to a tactic once reserved for more advanced traders.
The rise in covered call ETFs became especially noticeable after the 2022 bear market, when these funds outperformed broader equity benchmarks due to their ability to capitalize on elevated market volatility.
Investors were drawn to their high-income potential, often yielding far more than traditional dividend ETFs.
Image source: Getty Images.
But this isn’t a free lunch. Like most derivatives-based strategies, covered call ETFs come with trade-offs and added complexity.
They can cap upside potential, behave differently in various market environments, and aren’t always easy to compare due to differences in how they implement their strategy.
That’s why it’s important to understand how they work and whether they fit your portfolio before investing.
Best covered call ETFs
Seven best covered call ETFs in 2025
Covered call ETFs have exploded in popularity thanks to their high yields and defensive appeal. But not all funds in this category are built the same. In this section, we’ll go over seven of the best covered call ETFs for 2025.
Some follow strict indexes, while others are actively managed. Some prioritize income above all else, while others try to strike a better balance between yield and growth.
For each one, we’ll look at how it performed historically, its yield (either on a forward, 12-month trailing, or 30-day SEC basis), its expense ratio, whether it’s active or index-based, and the reason it’s worth considering.
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Global X S&P 500 Covered Call ETF
The Global X S&P 500 Covered Call ETF (XYLD -0.47%) tracks the CBOE S&P 500 BuyWrite index and holds all the stocks in the S&P 500. The 0.60% expense ratio is about average for a fund in this category.
Each month, it sells an at-the-money (ATM) call option that expires in one month on 100% of its portfolio.
The result is a consistently high yield, clocking in 13.34% on a 12-month trailing basis — but that yield comes at a cost.
Because it writes calls at the strike price where the stock is currently trading, any upside beyond that is capped. That’s why this ETF has returned only 6.8% annualized over the last 10 years with reinvested dividends.
Global X Nasdaq 100 Covered Call ETF
The Global X Nasdaq 100 Covered Call ETF (QYLD -0.65%) is the more aggressive cousin to the previous ETF, using the same strategy but with different underlying holdings.
It tracks the CBOE Nasdaq-100 BuyWrite V2 index and holds all the stocks in the Nasdaq-100. Like the Global X S&P 500 Covered Call ETF, it sells one-month at-the-money calls on 100% of its portfolio, and charges the same 0.60% expense ratio.
Because the Nasdaq-100 is more volatile, dominated by tech and growth stocks, this ETF collects larger option premiums. That’s why its distribution rate has been higher, at 14.33% as of May 8, 2025. But just like the other ETF, its upside is capped. The ATM strike means that gains beyond the call option are forfeited each month.
Over the last 10 years, this ETF has returned 7.88% annualized with reinvested distributions. The higher yield may appeal to income-focused investors, but the trade-off is limited capital appreciation.
JPMorgan Equity Premium Income ETF
The JPMorgan Equity Premium Income ETF (JEPI -0.3%) is the largest covered call ETF on the market, with more than $39 billion in assets under management.
Unlike the previous two ETFs discussed here, which follow a strict index approach, this ETF is actively managed and takes a more nuanced approach to generating income.
It starts with a portfolio of defensive, low-volatility stocks, aiming to reduce downside risk.
But it doesn’t write covered calls directly on these stocks. Instead, it allocates about 15% of its portfolio to equity-linked notes (ELNs), which are custom over-the-counter structured products that mimic the return profile of one-month, out-of-the-money (OTM) covered calls on the S&P 500.
This approach allows this ETF to collect options premium while preserving some upside, which helps explain its stronger total returns. Over the last three years, it delivered a 7.36% annualized return, compared to just 3.81% for the Global X S&P 500 Covered Call ETF.
The fund currently yields 11.03% based on its 30-day SEC yield and charges a low 0.35% expense ratio. However, its structure comes with two key drawbacks.
First, ELNs are not tax-efficient because they typically generate ordinary income, which is taxed at a higher rate than qualified dividends.
Second, because ELNs are over-the-counter contracts, they carry counterparty risk. You’re relying on the issuing bank to make good on the payout.
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JPMorgan Nasdaq Equity Premium Income ETF
The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ -0.34%) is the growth-oriented counterpart to the JPMorgan Equity Premium Income ETF, offering a similar strategy but focusing on the Nasdaq-100.
It actively manages a portfolio of primarily Nasdaq-listed stocks, with the flexibility to venture outside the benchmark when opportunities arise.
Like the previous ETF, it uses ELNs to implement a one-month out-of-the-money covered call strategy, but this time on the Nasdaq-100 index.
The higher volatility of tech and growth stocks translates to larger premiums, which is why this ETF currently sports a 15.26% 30-day SEC yield. Its expense ratio is 0.35%, matching its relatively low cost for an active strategy.
Although it’s a newer fund with limited history, this ETF has shown promise. Over the last year, the ETF returned 9.87% annualized, handily outperforming the Global X Nasdaq 100 Covered Call ETF‘s 5.29% during the same period.
As with the JPMorgan Equity Premium Income ETF, investors should understand the trade-offs. ELNs carry counterparty risk, and the distributions are tax-inefficient, mostly classified as ordinary income.
NEOS S&P 500 High Income ETF
The NEOS S&P 500 High Income ETF (SPYI -0.39%) is a newer entrant in the covered call ETF space with a unique hybrid approach. It passively holds S&P 500 stocks as its equity base but actively manages the options overlay, buying and selling S&P 500 index options (SPX).
This structure gives this ETF two key tax advantages. First, SPX index options fall under Section 1256 of the tax code, meaning that gains are taxed on a 60/40 split — 60% long-term, 40% short-term — regardless of holding period, often resulting in a lower effective tax rate.
Second, because of how the fund manages its options and capital gains, a significant portion of its 12.11% distribution yield is classified as return of capital, which is tax-efficient since it reduces your cost basis instead of generating immediate taxable income.
While it carries a slightly higher 0.68% expense ratio, the fund’s performance since its August 2022 inception has been strong. It delivered a 31.52% cumulative return, outpacing the CBOE S&P 500 BuyWrite Monthly Index, which returned 25.65% over the same period.
This ETF may appeal to investors who are looking for tax-smart high income without giving up entirely on growth potential and who are comfortable with a newer fund.
NEOS Nasdaq-100 High Income ETF
This covered call ETF passively holds stocks from the Nasdaq-100, allowing for tax-loss-harvesting opportunities, while actively managing an options overlay using NDX index options, which, like SPX, are Section 1256 contracts.
Given the higher volatility of the Nasdaq-100, the NEOS Nasdaq-100 High Income ETF (QQQI -0.56%) is able to generate larger option premiums, which explains its elevated 13.92% distribution rate.
Like the NEOS S&P 500 High Income ETF, a meaningful portion of those distributions is classified as return of capital, which can help defer taxes by reducing cost basis instead of triggering immediate income tax.
The fund charges a 0.68% expense ratio, and although it’s newer — launched on Jan. 30, 2024 — it’s already showing strong results.
Since inception, it has delivered a 14.08% cumulative return, outperforming the CBOE Nasdaq-100 BuyWrite Monthly Index, which returned 12.19% over the same period.
Amplify CWP Enhanced Dividend Income ETF
The Amplify CWP Enhanced Dividend Income ETF (DIVO -0.56%) takes a more selective and tactical approach to covered call investing. It starts with a concentrated, actively managed portfolio of 25 to 30 high-quality, large-cap U.S. stocks.
The fund’s managers screen for companies with strong dividends, consistent earnings and cash flow growth, high return on equity, and a solid management track record, spanning most sectors for diversification.
Where DIVO stands out is its flexible options overlay. Instead of selling index calls or writing on the entire portfolio, the fund’s managers tactically write call options on individual stocks.
They choose the timing, strike prices, and coverage ratios based on market conditions and stock-specific outlooks. This allows for more control over the balance between income and capital appreciation.
As a result, DIVO offers a lower distribution yield of 4.76%, but superior long-term total returns. Over the past five years, it has returned 13.28% annualized, outperforming the CBOE S&P 500 BuyWrite Index’s 10.32% during the same period.
The expense ratio is 0.56%, which is reasonable for an actively managed covered call ETF with selective stock picking and tactical option execution.
Related investing topics
Should you invest?
Should you buy a covered call ETF?
Covered call ETFs are not beginner funds. They’re built using options strategies that come with trade-offs, and their best use cases fall into two specific categories.
The first is for older investors who are in the decumulation phase, meaning they’re using their portfolios to generate income for living expenses.
In this context, covered call ETFs can provide steady monthly distributions, which makes them attractive when held in a tax-sheltered account like a Roth IRA. There, the income is tax-free and can be withdrawn without penalty.
The second use case is for tactical investors who expect a rangebound, high-volatility market. In that environment, stocks don’t break out significantly but bounce around, which is ideal for covered call strategies.
These ETFs can outperform broad market funds in that specific setup by repeatedly collecting premiums without giving up large upside moves because there aren’t any.
However, outside of those two scenarios, most covered call ETFs will underperform traditional index ETFs. That’s because the upside is capped by the very nature of the strategy, and the tax drag is significant, especially in taxable accounts.
Ultimately, total return is what matters. Chasing high headline yields without understanding the risks behind them can lead to subpar long-term results. If you’re not using them for income or in the right market environment, covered call ETFs might be more of a drag than a boost.
FAQ
Covered Call ETFs FAQ
How do covered call ETFs work?
Covered call ETFs work by owning a portfolio of stocks and selling call options on a reference index or individual stocks, which effectively sells future upside in exchange for immediate premium income.
Are covered call ETFs actively managed?
Some covered call ETFs are actively managed, either by selecting the underlying stocks or by tactically writing the call options rather than strictly following an index.
What are the risks of covered call ETFs?
The major risk is underperforming traditional long-only strategies over time. Other risks include potentially large tax liabilities and, for certain ETFs, counterparty risk from the use of ELNs.
How often do covered call ETFs pay distributions?
Most covered call ETFs pay distributions monthly, though a few offer weekly payouts.