Exchange-traded fund (ETF) inflows hit a record $1.9 trillion in 2024, pushing total ETF assets to $14.7 trillion. 

However, with 10-year U.S. Treasury yields hovering near 4.4%, income-hungry investors face a situation in which traditional ETFs struggle to compete. This has prompted a shift toward innovative strategies aimed at securing higher yields.

Three notable funds are reshaping the income investing landscape by offering yields that far exceed conventional alternatives. Each one uses advanced covered call strategies on major indexes, turning volatile markets into reliable monthly income streams. 

ETF #1: Global X Nasdaq 100 Covered Call ETF

The Global X Nasdaq 100 Covered Call ETF (QYLD) tracks the CBOE NASDAQ-100 BuyWrite V2 Index. With assets under management reaching $8.38 billion, QYLD’s annual distribution rate sits at 14.13%, paying out distributions monthly.

The fund maintains positions in all stocks in the Nasdaq 100 Index ($IUXX) and simultaneously sells call options on the index, effectively covering 100% of its portfolio. This strategy is aimed at collecting option premiums, which are distributed monthly. While this delivers a robust income stream, the tradeoff comes in the form of capped upside during sharp rallies.

The fund’s expense ratio is 0.6%, which is competitive given the complexity of its options strategy and the steady cash flow it aims to provide. The ETF is down 8.7% in the year to date and is down 6.7% over the past year.

ETF #2: NEOS S&P 500 High Income ETF

The NEOS S&P 500 High Income ETF (SPYI) is a product of NEOS Funds and began trading on Aug. 31, 2022. The ETF also pays out monthly distributions and has a 12-month distribution rate of 12.65%. 

This ETF is built on the back of the S&P 500 Index ($SPX), but it’s not just a passive tracker. It holds the stocks in the benchmark index, and then in addition to selling call options on the index, its managers buy put options on the same index. This creates a “collar” effect, aiming to retain more of the upside potential of its holdings if the market breaks out to the upside. 

SPYI manages $3.9 billion in assets. The fund’s expense ratio is 0.68%, which is in line with its active approach and complex strategy. SPYI is down 2.4% in the year to date and 1.9% over the past 52 weeks. 

ETF #3: ProShares S&P 500 High Income ETF

The ProShares S&P 500 High Income ETF (ISPY) brings a new twist to the high-yield ETF space. Tracking the S&P 500 Daily Covered Call Index, ISPY is the first ETF to implement a daily covered call overlay on the S&P 500. This means that rather than the typical monthly or weekly cadence, ISPY writes fresh out-of-the-money call options every single trading day, using swap agreements to access the full S&P 500 portfolio and maximize option premium capture.

This high-frequency approach is designed to exploit the rapid time decay of daily options, allowing the fund to reset its strike price each day and adjust to changing market conditions. The result is a steady stream of elevated income, with the added benefit of some downside protection if markets turn choppy. However, this daily reset also means that returns are more closely tethered to short-term market swings, and the fund may lag in strong, sustained bull runs since upside is capped.

Its 12-month distribution rate is 12.82%, and like QYLD and SPYI, it pays out distributions monthly. 

ISPY’s assets under management stand at $740.3 million, and the fund charges an expense ratio of 0.55%, which is competitive for an actively managed, options-driven ETF. ISPY is down 7.9% in the year to date and 6.3% over the past 52 weeks. 

Conclusion

High-yield covered call ETFs like QYLD, SPYI, and ISPY offer a compelling way to boost monthly income, though they do sacrifice some growth potential for those generous payouts. 

Considering the current volatile investing environment, it’s reasonable to expect these ETFs to stay relevant for income seekers in 2025.