In October 2024, the equity strategy team at Goldman Sachs Group Inc. (ticker: GS) predicted that the S&P 500 would deliver an annualized total return of just 3% over the next decade. This figure was nominal, meaning that after accounting for inflation, real returns could be even lower.
Goldman’s team based this outlook on its belief that the outsized growth and multiple expansion of the “Magnificent Seven” stocks had been the primary driver of recent market gains, and that such momentum was unsustainable over extended periods.
Goldman also pointed to valuation concerns. At the time of the prediction, the cyclically adjusted price-to-earnings (CAPE) ratio, which measures stock prices relative to the average inflation-adjusted earnings over the past 10 years, stood at 38.
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This placed it in the 97th percentile historically, a level that has been associated with subdued long-term return. For equity investors who share Goldman’s assessment, a covered call strategy may help position their portfolio for lower-return expectations.
A covered call strategy works by selling call options on a stock or basket of stocks already held in the portfolio. The investor collects a premium from selling the call, generating immediate income.
The trade-off is that if stock prices rise above the option’s strike price by the time of expiry, the upside potential is capped because the shares are called away.
“Essentially, a covered call writer is forgoing some upside potential in exchange for additional current income,” says Robert Johnson, professor of finance at Creighton University’s Heider College of Business.
But in an environment where equity returns are expected to be muted, this strategy can provide consistent cash flow while benefiting from higher volatility. “The price you receive for selling a call with the same number of days to expiration is not always the same — it is based in part on the expected future volatility of the underlying stock,” says Justin Zacks, vice president of strategy and spokesperson, North America, at Moomoo, a brokerage platform. “During periods of uncertainty, call sellers may receive higher-than-usual premiums.”
As with many complex derivative-based strategies, covered call writing can now easily be automated via an exchange-traded fund (ETF).
“With a covered call ETF, the stock purchase, portfolio management and call writing decisions are left to a professional,” Johnson says. “By buying a covered call ETF, one doesn’t have to continuously monitor both the stock and options markets.”
Here are seven of the best covered call ETFs to buy right now:
| ETF | Expense ratio | Distribution yield |
| JPMorgan Equity Premium Income ETF (JEPI) | 0.35% | 7.9% |
| JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) | 0.35% | 9.3% |
| Amplify CWP Enhanced Dividend Income ETF (DIVO) | 0.56% | 4.8% |
| Amplify CWP Growth & Income ETF (QDVO) | 0.55% | 8.6% |
| Amplify CWP International Enhanced Dividend Income ETF (IDVO) | 0.66% | 6.0% |
| Roundhill S&P 500 0DTE Covered Call Strategy ETF (XDTE) | 0.95% | 26.4% |
| iShares 20+ Year Treasury Bond BuyWrite Strategy ETF (TLTW) | 0.35% | 19.7% |
JPMorgan Equity Premium Income ETF (JEPI)
With just over $39 billion in assets under management (AUM), JEPI currently ranks as the largest actively managed ETF in the U.S. market. It is also one of the cheapest, with a 0.35% expense ratio. This ETF starts by assembling a portfolio of U.S. large-cap stocks selected for low volatility and strong fundamentals, designed to deliver a significant portion of the S&P 500’s return with lower risk.
To generate monthly income, JEPI buys equity linked-notes (ELN), a security that provides it with the payoff profile of an out-of-the-money (OTM) covered call writing strategy on the S&P 500. This is necessary because JEPI does not hold the actual stocks needed to sell S&P 500 options directly. Currently, the ETF pays a 7.9% distribution yield, although this can fluctuate based on volatility.
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
JEPQ is the more aggressive counterpart to JEPI. This ETF begins with a similar actively managed equity strategy, although the selection universe now comes from the Nasdaq-100 index. This gives JEPQ’s portfolio more of a mega-cap growth tilt with a focus on technology sector stocks. As with JEPI, JEPQ also deploys an OTM covered call strategy via ELNs but does so with the Nasdaq-100 as the reference index.
Because the Nasdaq-100 tends to be more volatile than the S&P 500, JEPQ’s covered call overlay delivers a higher yield than JEPI. Currently, investors can expect a 9.3% distribution yield, but again, this can fluctuate based on market conditions. JEPQ charges the same 0.35% expense ratio as JEPI and is also well capitalized, with around $24 billion in AUM.
Amplify CWP Enhanced Dividend Income ETF (DIVO)
“Unlike most index-based covered call ETFs that write calls robotically at set times, DIVO’s actively managed approach not only allows the manager to monitor holdings each day to ensure they meet quality and valuation metrics, but it also provides the flexibility to take advantage of timely opportunities by writing calls on individual stocks,” says Christian Magoon, CEO of Amplify ETFs.
This ETF holds a portfolio of 25 to 30 dividend growth stocks screened for quality. But unlike other covered call ETFs, DIVO doesn’t robotically sell calls at a preset expiry and strike. “Instead, DIVO adjusts based on market conditions, writing calls selectively when the timing is right,” Magoon explains. This strategy has helped DIVO earn a five-star Morningstar rating, signaling superior risk-adjusted returns in its category.
Amplify CWP Growth & Income ETF (QDVO)
“QDVO is designed to capture growth while still delivering monthly income,” Magoon explains. “The fund balances upside potential and income generation by selecting high-growth U.S. equities in technology and consumer discretionary sectors and pairing them with an actively managed covered call strategy.” As with DIVO, the covered call writing is done with individual stocks on a tactical basis.
Compared to DIVO, QDVO’s portfolio is less defensive, with a 41% allocation to technology. This ETF screens stocks based on earnings growth, cash flow, momentum and management track record. The top holdings include all of the Magnificent Seven stocks. These stocks tend to be fairly volatile, which contributes to QDVO’s high 8.6% distribution yield. The ETF charges a 0.55% expense ratio.
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Amplify CWP International Enhanced Dividend Income ETF (IDVO)
“IDVO owns high-quality, dividend-paying international stocks while maintaining the ability to tactically write covered calls on individual stocks,” Magoon says. “Foreign stock exposure will further diversify a U.S. stock portfolio and perhaps increase total return potential.” This ETF follows a similar strategy as DIVO but uses the MSCI ACQI ex USA index as its selection universe.
Stocks in IDVO are largely American depositary receipts screened for earnings growth, free cash flow and return on equity. Unlike U.S. equity ETFs, IDVO overweights financial, energy and consumer discretionary companies. Top countries represented include the U.K., Canada, Brazil and China. The ETF pays a 6% distribution yield and charges a 0.66% expense ratio.
Roundhill S&P 500 0DTE Covered Call Strategy ETF (XDTE)
“Following back-to-back years of the S&P 500 rising over 25% on a total return basis, 2025 may be the time to refocus on income generation and risk management,” says Thomas DiFazio, ETF strategist at Roundhill Investments. “Investor sensitivity to bad news is elevated — this clear fragility was on display during the negative market reactions to DeepSeek and, more recently, tariffs.”
However, higher volatility benefits covered call strategies, particularly zero-day-to-expiry (0DTE) variants like XDTE. This ETF provides overnight exposure to the S&P 500 while selling an OTM index call every morning, expiring the same day. This strategy allows the XDTE to harness structural mispricings while generating a high 26.4% distribution yield along with weekly payouts, a rarity.
iShares 20+ Year Treasury Bond BuyWrite Strategy ETF (TLTW)
Covered call strategies aren’t just limited to equities. A great example is TLTW, which sells covered calls on the iShares 20+ Year Treasury Bond ETF (TLT). TLT’s portfolio of Treasury bonds is highly sensitive to changes in long-term yields, which makes the ETF volatile. TLTW harnesses that volatility by monetizing it with a covered call overlay, producing a 19.7% distribution yield.
TLTW’s strategy isn’t active. Instead, it’s based on the CBOE TLT 2% OTM Buywrite Index. Every month, TLTW will sell a TLT covered call with one month until expiry. The price of that call will be 2% OTM, meaning that it is slightly above the current market price of TLT at the time of writing, leaving the ETF with a small degree of upside potential. TLTW remains fairly affordable, with a 0.35% expense ratio.
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Update 02/18/25: This story was previously published at an earlier date and has been updated with new information.
