Best Covered Call ETFs for 2026

Covered call ETFs generate income by selling call options on stocks or indices they hold, collecting premium that is then distributed to shareholders as dividends. This options-based income strategy has surged in popularity as investors seek high yields in a world where traditional bonds may not provide sufficient income. Covered call ETFs typically offer yields of 7-12%, significantly higher than most dividend stocks or bond funds.

JEPI from JPMorgan has become the poster child of the covered call ETF movement, combining equity-linked notes tied to the S&P 500 with an active management overlay that selects low-volatility stocks. XYLD from Global X writes covered calls on the S&P 500 index, providing a more systematic and transparent approach. QYLD, also from Global X, applies the same covered call strategy to the Nasdaq-100 index, offering higher premiums due to the greater volatility of tech stocks but also capping more upside potential.

The tradeoff with covered call strategies is clear: you receive enhanced income in exchange for capping your upside potential. When markets rally strongly, covered call ETFs will underperform because the sold calls limit gains above the strike price. In flat or slightly declining markets, however, the option premium provides a cushion that can result in outperformance. Understanding this tradeoff is essential for setting realistic return expectations and determining how covered call ETFs fit within your overall portfolio.