There are many ways to earn a tangible return from your investments, depending on your preferences. Some investors focus on capital appreciation. Others rely on current income.
For example, if tax efficiency is your top priority, you might prefer stocks that pay little or no dividends. The logic here is simple: Your return comes mainly from share price growth, which allows you to defer capital gains taxes until you actually sell the investment.
On the other hand, if you’re using your portfolio to generate steady income, you may prefer stocks that deliver most of their returns through dividends. These tend to come from mature industries like tobacco, banking and energy, where companies have less room to grow but generate plenty of free cash flow.
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Another strategy for boosting income involves using derivatives, specifically, options. Consider what an investor can do if they own 100 shares of a stock like Nvidia Corp. (ticker: NVDA), a semiconductor giant and a prominent member of the Magnificent Seven group of stocks.
Nvidia trades at around $144 per share and pays a minuscule 0.03% forward dividend yield, so most of its return comes from share price gains. But if you know how to trade options, you can generate income from Nvidia without needing it to pay a dividend.
With 100 shares, you can sell a covered call. That gives someone else the right to buy your Nvidia shares at a set price (called the strike price) by a certain date (called the expiration date).
In exchange, you receive an upfront cash payment known as the premium. The size of that premium depends on how far the strike price is from Nvidia’s current price, how much time is left until expiration and how volatile the stock is.
For instance, if you sell a covered call expiring July 18 at the $150 strike price, you could pocket about $3.25 per share, or $325 in total for 100 shares. That’s income you receive immediately, regardless of whether the option is exercised.
However, covered calls involve trade-offs. If Nvidia rockets past $150, your upside is capped, as you’ll have to sell the stock at the strike price. But if it stays below $150, you keep the premium and your shares. The best-case scenario for you as the covered call seller is a flat, range-bound market.
If this sounds too complex or hands-on, don’t worry. There are plenty of covered call exchange-traded funds (ETFs) that automate the entire process. Some even use Nvidia as the underlying asset. Others take a broader approach, selling covered calls on major indexes like the S&P 500 or on diversified portfolios of stocks.
Here are seven of the best covered call ETFs to buy right now:
| ETF | Expense Ratio | Distribution Yield |
| JPMorgan Equity Premium Income ETF (JEPI) | 0.35% | 11.5% |
| JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) | 0.35% | 14.1% |
| NEOS S&P 500 High Income ETF (SPYI) | 0.68% | 12.2% |
| NEOS Nasdaq-100 High Income ETF (QQQI) | 0.68% | 14.9% |
| Amplify CWP Enhanced Dividend Income ETF (DIVO) | 0.56% | 4.7% |
| Amplify CWP International Enhanced Dividend Income ETF (IDVO) | 0.66% | 6.0% |
| Amplify CWP Growth & Income ETF (QDVO) | 0.55% | 10.8% |
JPMorgan Equity Premium Income ETF (JEPI)
“With a covered call ETF, the stock purchase, portfolio management and call writing decisions are left to a professional,” says Robert Johnson, professor of finance at Creighton University’s Heider College of Business. “By buying a covered call ETF, one doesn’t have to continuously monitor both the stock and options markets.” This can be helpful for investors who lack the technical know-how for options selling.
JEPI is the largest U.S.-listed covered call ETF, with about $40 billion in assets. This ETF starts with an actively managed portfolio of low-volatility, defensive mid- and large-cap U.S. stocks. Then, JEPI allocates up to 15% of its portfolio to structured products called equity-linked notes (ELNs). These give JEPI the payoff profile of an S&P 500 covered call strategy, which currently produces an 11.5% distribution yield.
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
“The price you receive for selling a call with the same number of days to expiration is not always the same — it is based in part on the expected future volatility of the underlying stock,” says Justin Zacks, vice president of strategy and spokesperson, North America, at Moomoo, a brokerage platform. “During periods of uncertainty, call sellers may receive higher-than-usual premiums.”
This mechanic is why JEPI’s more aggressive counterpart, JEPQ delivers a higher 14.1% distribution yield. Instead of selling S&P 500 covered calls via ELNs, JEPQ targets the Nasdaq-100. This growth- and tech-oriented benchmark is more volatile and, consequently, produces higher premiums when a covered call overlay is employed. JEPQ charges a reasonable 0.35% expense ratio, the same as JEPI.
NEOS S&P 500 High Income ETF (SPYI)
JEPI’s use of ELNs for its covered call overlay is sophisticated and capital-efficient, but it has drawbacks when it comes to tax efficiency. This is because the distributions from JEPI are mostly categorized as ordinary income. For greater tax efficiency, consider SPYI. This ETF holds a portfolio of S&P 500 stocks and sells S&P 500 index options, which the IRS calls Section 1256 contracts.
This means gains from SPYI’s options overlay are taxed using the 60-40 rule, with 60% at the long-term rate and 40% at the short-term rate, regardless of holding period. In addition, SPYI actively tax-loss harvests individual stocks within its portfolio, allowing much of its 12.2% distribution yield to be categorized as return of capital, which isn’t immediately taxable but instead reduces your cost basis.
[Read: 10 Best Tech Stocks to Buy for 2025]
NEOS Nasdaq-100 High Income ETF (QQQI)
NEOS offers a Nasdaq-100 alternative to SPYI with QQQI, which functions as a more aggressive sibling by targeting the tech-heavy Nasdaq-100 index. Like SPYI, QQQI holds the underlying stocks and sells index options that fall under Section 1256, qualifying for the more favorable 60/40 long-term and short-term tax treatment. This contrasts with JEPQ, which largely pays ordinary income.
QQQI also employs active tax-loss harvesting, helping ensure a large portion of its 14.9% distribution is classified as return of capital. That said, QQQI’s high payout is largely driven by the Nasdaq-100’s elevated volatility, and future monthly distributions can fluctuate depending on market conditions. Investors should view the current income level from QQQI as variable, not fixed.
Amplify CWP Enhanced Dividend Income ETF (DIVO)
“Unlike most index-based covered call ETFs that write calls robotically at set times, DIVO’s actively managed approach not only allows the manager to monitor holdings each day to ensure they meet quality and valuation metrics, but it also provides the flexibility to take advantage of timely opportunities by writing calls on individual stocks,” says Christian Magoon, CEO of Amplify ETFs.
DIVO’s 4.7% distribution yield is lower than most covered call ETFs, but don’t let that fool you. On a total return basis, DIVO has been a standout. The ETF holds a five-star Morningstar rating, a designation only awarded to ETFs that have outperformed the majority of their category peers on a risk-adjusted basis. The ETF has returned an annualized 13.2% total return over the last five years.
Amplify CWP International Enhanced Dividend Income ETF (IDVO)
“IDVO owns high-quality, dividend-paying international stocks while maintaining the ability to tactically write covered calls on individual stocks,” Magoon says. “Foreign stock exposure will further diversify a U.S. stock portfolio and perhaps increase total return potential.” The distribution yield of IDVO is slightly higher than DIVO, at 6%, because international stocks tend to pay greater yields on average.
IDVO’s stock selection strategy follows a similar methodology as DIVO. The sub-adviser, Capital Wealth Planning, screens for large-cap stocks with robust earnings growth, free cash flow, dividend growth and return on equity. This supports a base dividend yield of around 3% to 4%. From there, IDVO’s covered call overlay is expected to generate another 2-to-4 percentage points in options premium income.
Amplify CWP Growth & Income ETF (QDVO)
Investors looking to harness Capital Wealth Planning’s active covered call writing strategy, but with a higher risk focus, might prefer QDVO over DIVO. This ETF targets large-cap growth stocks, with a portfolio that currently consists of numerous Magnificent Seven names like Nvidia, Microsoft Corp. (MSFT), Apple Inc. (AAPL), Meta Platforms Inc. (META), Amazon.com Inc. (AMZN) and Alphabet Inc. (GOOG, GOOGL).
The higher volatility of these tech and growth-oriented names gives QDVO a yield advantage over DIVO’s more defensive and dividend-focused portfolio. Currently, QDVO pays an 10.8% distribution yield. Investors should be comfortable with a higher concentration in technology, communication and consumer discretionary stocks, which could exacerbate sector-specific risks.
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7 High-Yield Covered Call ETFs Income Investors Will Love originally appeared on usnews.com
Update 06/18/25: This story was previously published at an earlier date and has been updated with new information.