Covered Call ETFs Explained: How That 8% Yield Actually Works (and What You Give Up)
An 8% yield, with some funds advertising 11% or higher. In a world where the S&P 500 pays barely 1% and Treasuries yield in the 4% to 4.75% range, covered call ETFs look almost too good to be true, and they've pulled in more than $150 billion from income-hungry investors. But that yield isn't free money. It comes from a specific options strategy with a specific, often misunderstood, tradeoff. Here's exactly how covered call ETFs work, where the yield comes from, and what you give up to get it.
An 8% yield, with some funds advertising 11% or higher. In a world where the S&P 500 pays barely 1% and Treasuries yield in the 4% to 4.75% range, covered call ETFs look almost too good to be true, and they've pulled in more than $150 billion from income-hungry investors. But that yield isn't free money. It comes from a specific options strategy with a specific, often misunderstood, tradeoff. Here's exactly how covered call ETFs work, where the yield comes from, and what you give up to get it.
What's Your Reaction?
:max_bytes(150000):strip_icc()/GettyImages-2187410260-5afe56694791404f99c253dd8d5abe6a.jpg?#)
