Generate Ridiculous Income with Covered Call ETFs

If it isn’t abundantly clear, I love dividends. They’re super passive and if you buy great companies, you get the trifecta of income, capital appreciation, and inflation beating income growth.

However, there are some potential downsides to a simple dividend growth investing strategy:

  1. Smaller universe of stocks
  2. Potentially lower income
  3. Somewhat limited upside because dividend paying stocks are more mature

If you’re seeking extra income, you might want to consider Covered Calls (referral link). The nice thing is there are a number of funds that you can outsource this strategy to. GlobalX provides some very nice funds for those wanting to limit downside AND generate higher income than a normal DGI strategy might.

XYLD

  • Tracks the S&P 500 Index
  • Monthly Distributions
  • 8.55% 12 month trailing yield
  • 0.60% Expense Ratio

QYLD

  • Tracks the Nasdaq 100 Index
  • Monthly Distributions
  • 11.54% 12 month trailing yield
  • 0.60% Expense Ratio

RYLD

  • Tracks the Russell 2000 Index
  • Monthly Distributions
  • 11.00% 12 month trailing yield
  • 0.60% Expense Ratio

Summary Table

NameTickerIndexTTM YieldDistribution YieldNAVExpense Ratio
S&P 500 Covered Call ETFXYLDS&P 5008.55%13.15%$47.230.6%
Nasdaq 100 Covered Call ETFQYLDNasdaq 10011.54%12.75%$23.400.6%
Russell 2000 Covered Call ETFRYLDRussell 200011.00%12.65%$23.420.6%

In general the table above makes sense in terms of yield. Option premiums are coupled with volatility. The Nasdaq and Russell 2000 are generally “riskier” making the premiums that the covered call fund higher. For what it’s worth I am re-evaluating my portfolio to add either $QYLD or $RYLD. This should give the portfolio a slight boost in income which I’m a big fan of during my ramen noodle phase startup push.

2 thoughts on “Generate Ridiculous Income with Covered Call ETFs

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