Covered call ETFs offer income investors a powerful strategy: combining high dividend yields with reduced volatility. In this guide, we explore 5 high-dividend covered call ETFs that provide consistent monthly income—and break down whether this approach is right for your portfolio in 2025.
- Covered call ETFs combine high-dividend stocks with options premiums to deliver monthly income.
- QYLD, JEPI, XYLD, RYLD, and DIVO are five of the most popular high-yield covered call ETFs in 2025.
- They’re ideal for retirees and income-focused investors seeking predictable, recurring cash flow.
- This guide explains how the strategy works, compares ETF options, and highlights common pitfalls to avoid.
Table of Contents
🔍 What Are Covered Call ETFs and How Do They Work?
Covered call ETFs are a unique breed of exchange-traded funds (ETFs) designed to generate income by writing (selling) call options on a basket of underlying assets, such as stocks. Here’s how they work:
- The ETF manager owns a portfolio of stocks.
- They write call options on these stocks, essentially agreeing to sell them at a predetermined price (the strike price) if the option buyer chooses to exercise the option.
- In exchange for writing these call options, the ETF collects premiums from option buyers, which become part of the fund’s income.
A popular example of a covered call ETF is the Global X NASDAQ-100 Covered Call ETF (QYLD), which generates income by selling covered calls on the NASDAQ-100 Index.
🟢 High-Dividend Covered Call ETFs for Reliable Income
Looking for high dividend income with less market risk? Covered call ETFs generate monthly income by selling call options on their stock holdings—and passing that premium to investors.
They’re ideal for income-focused investors seeking predictable, recurring cash flow, especially in a sideways or mildly bullish market.
💸 5 High-Dividend Covered Call ETFs Paying Monthly Income
Each of these covered call ETFs follows a slightly different approach but shares one goal: delivering reliable monthly income. Here’s how they compare:
🥇 1. QYLD – Global X Nasdaq 100 Covered Call ETF
- Yield: ~11–12%
- Dividend Frequency: Monthly
- Focus: Nasdaq-100 (tech-heavy)
- Summary: Offers some of the highest income among covered call ETFs. Trades upside for premium income. Best suited for aggressive income seekers.
📊 2. XYLD – Global X S&P 500 Covered Call ETF
- Yield: ~10–11%
- Dividend Frequency: Monthly
- Focus: Large-cap U.S. stocks (S&P 500)
- Summary: A more diversified take on covered call income. Slightly lower yield than QYLD, with broader market exposure.
📉 3. RYLD – Global X Russell 2000 Covered Call ETF
- Yield: ~11%
- Dividend Frequency: Monthly
- Focus: Small-cap stocks
- Summary: Higher yield, higher volatility. Great for investors seeking income from small-cap exposure but willing to ride out price swings.
🧩 4. JEPI – JPMorgan Equity Premium Income ETF
- Yield: ~8–10%
- Dividend Frequency: Monthly
- Focus: Large-cap value and low-volatility stocks
- Summary: Combines options income with a defensive equity strategy. More conservative than QYLD/RYLD, ideal for income with downside protection.
🛡️ 5. DIVO – Amplify CWP Enhanced Dividend Income ETF
- Yield: ~5%
- Dividend Frequency: Monthly
- Focus: Dividend growth stocks + tactical options
- Summary: Prioritizes capital preservation and high-quality companies. Great for conservative investors or those near retirement.
📊 Covered Call ETF Comparison Table
| ETF | Yield (Est.) | Dividend Frequency | Index/Strategy Focus | Risk Profile |
|---|---|---|---|---|
| QYLD | ~11–12% | Monthly | Nasdaq-100 | High Income / High Volatility |
| XYLD | ~10–11% | Monthly | S&P 500 | Balanced |
| RYLD | ~11% | Monthly | Russell 2000 | High Volatility |
| JEPI | ~8–10% | Monthly | Large-Cap, Low-Volatility Stocks | Conservative Income |
| DIVO | ~5% | Monthly | Dividend Growth + Options | Capital Preservation |
❓ Covered Call ETF FAQs
❓ Is a Covered Call ETF Strategy a Good Idea?
Yes — for the right investor. Covered call ETFs generate income by selling call options, which is great for steady cash flow. However, they cap your upside, meaning you won’t fully benefit if the market rallies. These ETFs work best in sideways or gently rising markets and suit conservative, income-focused investors.
❓ Which Covered Call ETFs Pay Monthly Dividends?
Most leading covered call ETFs distribute income monthly, making them ideal for income planning. Examples include:
- QYLD – Global X Nasdaq 100
- XYLD – Global X S&P 500
- RYLD – Global X Russell 2000
- JEPI – JPMorgan Equity Premium Income
- DIVO – Amplify Enhanced Dividend Income
Monthly payouts allow for smoother budgeting and cash flow, especially for retirees or dividend-focused investors.
❓ What Is the Global X Nasdaq 100 Covered Call UCITS ETF?
For non-U.S. investors, especially in Europe, Global X offers a UCITS-compliant version of QYLD. The Global X Nasdaq 100 Covered Call UCITS ETF follows the same options-writing strategy but is structured for European tax and regulatory standards. It’s a great alternative for accessing U.S.-style income without holding U.S.-domiciled funds.
⚠️ Common Pitfalls and How to Avoid Them
While covered call ETFs offer steady income, they aren’t without drawbacks. Here are some key risks to be aware of—and how to manage them:
🧨 1. Capped Upside Potential
Covered call strategies limit your gains. If the underlying index or stock surges, your ETF won’t capture the full upside because the calls sold act as a ceiling.
How to avoid it:
Use covered call ETFs in income-focused portfolios—not in high-growth accounts where capital appreciation is the main goal.
📉 2. Underperformance in Strong Bull Markets
In fast-rising markets, these ETFs often lag traditional index funds due to the call-writing drag.
How to avoid it:
Balance your allocation. Pair covered call ETFs with growth or dividend ETFs so you’re not missing out on broader market rallies.
🔄 3. Yield Chasing Without Understanding Risk
Many investors are drawn to 10%+ yields, but don’t realize that those payouts can fluctuate or come at the cost of capital stability.
How to avoid it:
Focus on total return—not just yield. Consider factors like fund volatility, expense ratios, and drawdown history before investing.
🔗 Related Posts
- 5 Powerful Ways Dividend ETFs Enhance Covered Call Success
- Unleash Wealth with Covered Call ETFs and Dividend Stocks: 5X Income Boost
🔚 Final Thoughts
Covered call ETFs are a powerful way to earn monthly income—especially when focusing on high-dividend options like QYLD, RYLD, and JEPI. Whether you prefer aggressive yield or capital preservation, there’s likely a fund that fits your strategy in 2025.