3 Covered Call ETFs That Actually Grow NAV

Covered call exchange-traded funds (ETFs) have surged in popularity as investors seek income in uncertain markets. These funds hold stocks or assets and sell call options to generate premiums, offering high yields often exceeding 10%. 

Strategies vary — some sell options on entire indexes, others on individual stocks, and some use active management for flexibility. A major drawback is net asset value (NAV) erosion, as distributions often outpace capital gains, especially in volatile or bearish markets. Their capped upside potential and sensitivity to market swings have sparked debate about their long-term value. 

Finding covered call ETFs with stable NAVs is difficult, and achieving NAV growth is rarer still. Yet, the three ETFs below stand out for doing just that. While they all offer high yields, they each approach their options-selling strategies in their own way.

NEOS S&P 500 High Income ETF (SPYI)

The NEOS S&P 500 High Income ETF (CBOE:SPYI) tracks the S&P 500 while actively selling out-of-the-money (OTM) call options on the index. This strategy delivers a 12.2% yield, appealing to income-focused investors. 

Since its inception, SPYI has grown its NAV, boasting a 15.2% total return over the past year, slightly ahead of the S&P 500’s 14.8% return. Its success stems from active management, which balances premium collection with capturing market upside. SPYI’s tax-efficient structure, using Section 1256 contracts with a 60/40 long-term/short-term tax split and tax-loss harvesting, minimizes NAV erosion by classifying some distributions as return of capital. 

With a 0.68% expense ratio, SPYI offers a compelling blend of income and growth. Its diversified exposure to the S&P 500 reduces risk compared to single-stock or sector-focused funds, making it ideal for investors prioritizing yield and capital preservation. 

SPYI’s ability to navigate various market conditions, from bullish to sideways, enhances its reliability. The ETF’s focus on OTM options allows it to retain more upside potential than at-the-money strategies, supporting long-term NAV growth for cautious investors.

NEOS Nasdaq-100 High Income ETF (QQQI)

The NEOS Nasdaq-100 High Income ETF (NASDAQ:QQQI) targets the Nasdaq-100, the tech-heavy index known for volatility, which boosts option premiums. Launched in January 2024, QQQI sells OTM call options, generating a 14.3% yield. Its NAV has grown, with a 21.1% cumulative return since inception, outperforming the CBOE Nasdaq-100 BuyWrite Index’s 12% performance. 

This growth is driven by a data-driven options strategy optimizing strike prices and expiration dates to capture upside while harvesting premiums. QQQI’s tax-efficient Section 1256 contracts reduce tax burdens, supporting NAV stability, while its 0.68% expense ratio is reasonable for active management. 

Though its short track record warrants caution, QQQI’s focus on volatile Nasdaq-100 stocks suits investors comfortable with tech exposure. The fund’s adaptability to market swings and its ability to leverage high volatility for premium income make it a standout. QQQI’s strategic option selection ensures it balances income generation with capital appreciation, appealing to growth-oriented income seekers.

NEOS Bitcoin High Income ETF (BTCI)

The NEOS Bitcoin High Income ETF (CBOE:BTCI), launched in October 2024, uses synthetic Bitcoin (CRYPTO:BTC) exposure via the VanEck Bitcoin ETF (CBOE:HODL) and sells layered call options on the CBOE Bitcoin ETF Index. With a 27.3% yield, BTCI has attracted attention for its NAV growth, driven by Bitcoin’s strong performance over the past year. Its strategy leverages Bitcoin’s volatility for substantial premiums, supporting income and appreciation. 

BTCI’s short history and single-asset focus make it riskier than diversified peers. Its expense ratio of 0.98% is likely higher due to complexity. However, since inception, BTCI has returned 57.99%

BTCI suits aggressive investors betting on Bitcoin’s rise, but its NAV stability depends on cryptocurrency trends, requiring diligent monitoring. 

The fund’s innovative approach to a volatile asset class offers unique potential for risk-tolerant portfolios, with its layered option strategy maximizing income while preserving capital growth opportunities.