2 Covered Call ETFs Delivering Big Passive Income Today

In today’s low-yield environment, investors seeking consistent passive income are turning to covered call exchange-traded funds (ETFs). These innovative funds combine the stability of owning a diversified portfolio of stocks with the income-generating power of selling call options, offering higher yields than traditional dividend stocks. 

By writing call options on their holdings, these ETFs collect premiums, boosting monthly distributions while providing some downside protection in volatile markets. This strategy appeals to retirees and income-focused investors who prioritize steady cash flow over aggressive capital growth. 

While covered call ETFs may cap upside potential during strong market rallies, their ability to deliver double-digit yields makes them a compelling choice for those seeking reliable income. With many ETFs employing this strategy, two stand out for their high yields, tax efficiency, and strong performance, offering investors a robust way to enhance portfolio income in today’s market.

JPMorgan Equity Premium Income ETF (JEPI)

The JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) is a top-tier option for investors seeking substantial passive income through a covered call strategy. JEPI holds a portfolio of low-volatility, large-cap U.S. stocks, primarily from the S&P 500, and allocates up to 15% of its assets to equity-linked notes (ELNs), which replicate the payoff of a covered call strategy on the S&P 500. 

This approach delivers an impressive 8.4% distribution yield, paid monthly, ideal for retirees and income-focused investors. In 2024, JEPI’s active management achieved a 10.2% annualized return over three years, outperforming many peers in its category. Its expense ratio of 0.35% remains competitive, though distributions are taxed as ordinary income, which may reduce tax efficiency for some investors. 

JEPI’s focus on defensive, high-quality stocks minimizes volatility, and the ELN structure allows participation in some market upside, unlike traditional covered call ETFs that cap gains more strictly. With $41 billion in assets under management, JEPI offers significant liquidity and scale, ensuring ease of trading. 

As market volatility continues to drive higher option premiums, JEPI’s disciplined strategy and diversified holdings position it to deliver consistent, high-yield income. For investors seeking a balance of steady cash flow and modest growth potential, JEPI stands out as a reliable choice in the covered call ETF space, particularly in uncertain economic climates.

NEOS S&P 500 High Income ETF (SPYI)

The NEOS S&P 500 High Income ETF (CBOE:SPYI) is a standout for investors seeking high-yield passive income with enhanced tax efficiency. SPYI holds individual S&P 500 stocks and sells index call options, generating a robust 12.1% distribution yield, paid monthly. 

Launched in August 2022, SPYI has delivered a 42.8% cumulative return, surpassing the CBOE S&P 500 BuyWrite Index. Its 0.68% expense ratio is slightly higher but justified by its superior performance and tax efficiency. SPYI’s strategy balances high income with some capital appreciation, making it ideal for volatile markets. Its active management optimizes option selection to maximize premiums while retaining exposure to S&P 500 upside. 

As AI-driven trading and market uncertainty boost demand for income strategies, SPYI’s high yield, tax advantages, and strong returns make it a compelling choice. With growing assets and a focus on investor-friendly tax treatment, SPYI appeals to those diversifying portfolios with reliable, high-income ETFs, offering a powerful tool for passive income generation in today’s dynamic market environment.