Forget JEPI: This Covered Call ETF Yields Over 12% With Less NAV Erosion

Most income investors who discovered covered call ETFs found JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI) first. It pays monthly, yields around 8%, and carries JPMorgan’s name. The problem is that JEPI’s structure quietly costs investors in rising markets, and a newer fund from NEOS has spent the past year demonstrating a better approach.

What JEPI Actually Does (And Where It Falls Short)

JEPI generates income by selling equity-linked notes tied to S&P 500 options. The premium from those notes is what funds the monthly distribution. But this structure caps how much of any market rally JEPI can capture. When the S&P 500 runs hard, JEPI’s NAV lags because the options overlay surrenders the upside in exchange for income. Over the past year, JEPI returned 10.5% on a price basis while SPY returned 20.1% over the same period. That gap is the structural cost of the strategy.

SPYI Takes a Different Approach

NEOS S&P 500 High Income ETF (NYSEARCA:SPYI) uses a spread-based options strategy rather than selling calls outright. Instead of capping upside entirely, SPYI uses call spreads on the S&P 500 index, which allows more participation in rallies while still generating meaningful premium income. The result over the past twelve months tells the story: SPYI returned 19.9% on a price basis, nearly matching the S&P 500’s 20.1% gain, while JEPI trailed by nearly 10 points.

SPYI’s 7.6% dividend yield is slightly lower than JEPI’s 8.2%, but the spread-based structure allows SPYI to recover more of that gap through NAV appreciation — a dynamic that showed up clearly over the past year. For income investors, total return is the more complete scoreboard. The tradeoff between yield and total return is a key consideration when comparing these funds.

SPYI holds $45 billion in net assets and charges 0.35% in expenses, making it one of the larger and more cost-efficient options-income funds in the category — meaning less drag on total return, and its scale reflects the breadth of investor adoption since launch.

For Growth-Oriented Income Seekers: QQQI

Investors comfortable with more volatility have a second NEOS option. NEOS Nasdaq-100 High Income ETF (NASDAQ:QQQI) applies the same spread-based strategy to the Nasdaq-100, which carries heavier tech concentration but historically stronger long-term growth. QQQI launched in January 2024, so its track record is short, but the past year showed a 24.1% price return. The fund charges 0.68% in expenses and carries $8.9 billion in assets. QQQI targets investors who want income alongside Nasdaq-100 exposure.

Why This Market Environment Favors These Funds Right Now

The current setup is unusually favorable for options-income strategies. The VIX sits around 27.29, up from a month ago, which pushes option premiums higher and makes income generation more efficient. With the S&P 500 down year-to-date and the market choppy, covered call strategies are outperforming pure equity exposure because the income cushions the drawdown. SPYI is down just 1.9% year-to-date versus SPY’s 2.9% decline.

The 10-year Treasury at 4.27% also matters here. SPYI’s 7.6% yield represents a meaningful premium over risk-free rates, which provides context for comparing equity-income strategies against risk-free alternatives.

The Tradeoffs Worth Understanding

Neither SPYI nor QQQI is a free lunch. The spread strategy that preserves more upside also generates somewhat less premium than a pure covered call in flat or declining markets. QQQI’s Nasdaq concentration means a tech sector correction hits harder than it would in a broad S&P 500 fund. And both funds are young enough that their track records do not include a full bear market cycle, which matters for anyone relying on them for retirement income.

SPYI is structured for S&P 500 exposure with a 7.6% yield, with NAV fluctuation as part of the strategy. JEPI uses a different structure favored by conservative income-focused investors, while SPYI offers a spread-based approach for those researching S&P 500 income alternatives.

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