Covered-call and option-income ETFs

Funds that sell options to convert potential upside into distributable cash.

Covered-call (buy-write) ETFs hold a portfolio — an index, a sector, sometimes a single stock — and sell call options against it. The option premium they collect becomes distributable income, which is why these funds quote eye-catching yields.

The economics are a trade: in exchange for the premium, the fund gives up some or all upside above the option strike, while keeping most of the downside. In strong bull markets they lag badly; in flat or gently falling markets the income cushions returns. The 'yield' is largely harvested volatility, not free money, and distributions often include return of capital.

Single-stock option-income funds add concentration risk on top. Read how much of the portfolio is written against, at what strikes, and how distributions have behaved across market regimes.