There are several ways investors can earn a return from a long position in a stock. One of the most tax-efficient is to let management reinvest profits internally to compound the share price over time.
A classic example is Berkshire Hathaway Inc. (ticker: BRK.A, BRK.B), which does not pay a dividend and instead allocates capital across wholly owned subsidiaries and a portfolio of public equities.
Even after Warren Buffett stepped down at the end of 2025, successors Greg Abel and Ajit Jain continue to oversee the insurance float and allocation decisions that drive long-term value.
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Other companies emphasize dividends as the primary source of shareholder return. This is common in depletion businesses, such as oil or tobacco, where long-term reinvestment opportunities may be limited. When growth prospects are modest, returning cash to shareholders can be a rational strategy.
Altria Group Inc. (MO), for instance, is a “Dividend King” with more than 50 consecutive years of dividend increases. The stock currently yields 6.3%, targeting a payout ratio of 80% against earnings per share.
Others focus on opportunistic share repurchases when management believes the stock trades below intrinsic value. When executed correctly, buybacks reduce the share count and increase per-share earnings and ownership stakes for remaining investors.
A good example is Coca-Cola Consolidated Inc. (COKE), an independent bottler serving exclusive U.S. territories. This mid-cap company has aggressively repurchased shares, including buying back all outstanding stock previously held by a Coca-Cola Co. (KO) subsidiary in November.
There is also a fourth path available to investors who own at least 100 shares of a stock with an active options market: selling a covered call. By doing so, an investor agrees to potentially sell their shares at a preset price, known as the strike price, by a specific expiration date.
In exchange, the buyer of the call pays the seller a premium. This compensates them for the risk that the stock could rise above the strike price and be called away, which caps total returns. Premium size is influenced by factors such as time to expiration and the volatility of the underlying stock.
Because the mechanics are relatively straightforward, covered-call strategies have been widely packaged into exchange-traded funds (ETFs). The older ones sold call options on portfolios of stocks, either following buy-write indexes or using active management to determine strike selection and expiry.
The concept has expanded beyond equities to include bonds, precious metals and even cryptocurrencies. Many of these funds distribute income monthly, and some now pay weekly, offering yield-focused investors a more automated way to monetize volatility.
Here are seven of the best covered call ETFs to buy right now:
| Fund | Expense ratio | Distribution yield |
| JPMorgan Equity Premium Income ETF (JEPI) | 0.35% | 8.6% |
| JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) | 0.35% | 11.4% |
| Amplify CWP Enhanced Dividend Income ETF (DIVO) | 0.56% | 4.8% |
| Amplify CWP International Enhanced Dividend Income ETF (IDVO) | 0.65% | 6.2% |
| Amplify CWP Growth & Income ETF (QDVO) | 0.56% | 10.2% |
| NEOS Russell 2000 High Income ETF (IWMI) | 0.68% | 14.4% |
| FT Vest S&P 500 Dividend Aristocrats Target Income ETF (KNG) | 0.75% | 8.5% |
JPMorgan Equity Premium Income ETF (JEPI)
“With a covered call ETF, the stock purchase, portfolio management and call-writing decisions are left to a professional,” says Robert Johnson, professor of finance at Creighton University’s Heider College of Business. “By buying a covered call ETF, one doesn’t have to continuously monitor both the stock and options markets.” The most popular covered call ETF is JEPI, which currently has $44 billion in assets.
JEPI’s strategy begins with an actively managed portfolio of U.S. large-cap stocks selected for lower volatility. Compared to the S&P 500, JEPI’s portfolio is less top-heavy and concentrated in tech. Fifteen percent of JEPI’s portfolio is then reserved for equity-linked notes (ELNs), which provide the payoff profile of an out-of-the-money S&P 500 index covered call strategy. JEPI pays an 8.6% distribution yield.
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)
JEPI’s strategy is cleverly designed to capture the premium from S&P 500 index options while remaining grounded in large-cap defensive stocks. Investors looking for greater total return potential may prefer its Nasdaq-focused counterpart, JEPQ. This ETF’s portfolio skews more toward large-cap tech growth stocks. It also uses ELNs to track an out-of-the-money Nasdaq-100 index covered call overlay.
The higher volatility of the Nasdaq-100 index results in greater premiums captured by JEPQ’s use of ELNs. The ETF currently pays a higher 11.4% distribution yield. Because the Nasdaq-100 has performed well so far, JEPQ’s historical performance has been competitive, earning it a five-star Morningstar rating based on risk adjusted returns in its peer group. JEPQ charges a 0.35% expense ratio, the same as JEPI.
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.
DIVO does not use ELNs or index calls. The ETF actively assembles a portfolio of 20 to 25 dividend growth stocks screened for return on equity and free cash flow. From there, DIVO’s manager Kevin Simpson selectively writes calls, which gives the ETF more flexibility around key catalysts like earnings or economic releases. While the distribution yield is lower at 4.8%, DIVO’s total return has historically been excellent.
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.” IDVO currently pays a 6.2% distribution yield, with the ETF’s strategy calling for 3% to 4% from dividend income and 2% to 4% from covered call premiums.
IDVO’s underlying stock selection process is very similar to DIVO, with a focus on earnings quality, free cash flow and return on equity. However, it draws from the MSCI ACWI ex-USA benchmark instead, and allows for a larger portfolio of 30 to 50 stocks. The ETF achieves its foreign equity exposure via American depositary receipts (ADRs), many of which have active options markets.
Amplify CWP Growth & Income ETF (QDVO)
Many ETF issuers that offer covered call strategies tend to provide multiple versions tailored to different risk appetites. One version may focus on capital preservation and modest income, while another leans more heavily into growth and higher option premiums. Amplify has taken a similar approach alongside DIVO and IDVO. QDVO is the more aggressive sibling, currently paying a 10.2% distribution yield.
The fund typically holds between 20 and 40 large-cap U.S. stocks screened for earnings growth and momentum, then overlays a tactical covered call strategy on individual holdings. Because these growth-oriented names exhibit higher volatility, the option premiums collected are larger, boosting income. The trade-off is concentration risk, with technology accounting for roughly 47% of the portfolio.
NEOS Russell 2000 High Income ETF (IWMI)
Even more volatile than the Nasdaq-100 is the Russell 2000, a benchmark of small-cap stocks generally in the $2 billion to $10 billion range. Smaller companies tend to exhibit wider price swings, which translates into richer option premiums for covered call strategies. Investors can monetize that volatility through IWMI, which currently pays a 14.4% distribution yield with monthly payouts.
IWMI holds a core position in a Russell 2000 ETF and overlays index call options that qualify as Section 1256 contracts. These contracts receive blended 60% long-term and 40% short-term capital gains tax treatment. A large portion of IWMI’s historical distributions has been classified as return of capital, which is not immediately taxable but reduces an investor’s adjusted cost basis.
FT Vest S&P 500 Dividend Aristocrats Target Income ETF (KNG)
For a more defensive covered call strategy, investors may consider KNG. The fund is built on the S&P 500 Dividend Aristocrats Index, which includes large-cap companies that have raised dividends for at least 25 consecutive years. That quality screen tends to favor stable, cash-generative businesses over high-growth names. On top of that portfolio, the fund implements a systematic covered call overlay,
KNG sells call options on the third Friday of each month, with expiration the following month. The calls are typically written at or near the money, which limits upside price participation but enhances income generation. However, KNG does not write calls on 100% of the portfolio. Currently, the options overwrite ratio is 18.7%, preserving room for capital appreciation. The ETF pays an 8.5% distribution yield.
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7 High-Yield Covered Call ETFs Income Investors Will Love originally appeared on usnews.com
Update 02/19/26: This story was previously published at an earlier date and has been updated with new information.
