NEOS Launches Boosted High Income ETF Suite

NEOS Investments launched three Boosted High Income ETFs Tuesday, expanding the firm’s options-based product lineup with funds designed to amplify both market exposure and income generation.

The NEOS Boosted S&P 500 High Income ETF (XSPI), the NEOS Boosted Nasdaq-100 High Income ETF (XQQI), and the NEOS Boosted Bitcoin High Income ETF (XBCI) each seek to create approximately 150% notional exposure to their underlying markets, according to the funds’ prospectuses. The three ETFs aim to deliver higher monthly income alongside enhanced market participation compared to NEOS’ existing high income fund lineup.

The new funds build on strategies used in NEOS’ three largest ETFs: the NEOS S&P 500 High Income ETF (SPYI), the NEOS Nasdaq-100 High Income ETF (QQQI), and the NEOS Bitcoin High Income ETF (BTCI). These funds combine equity or bitcoin exposure with covered call writing to generate monthly distributions, according to a company press release. The boosted versions add a synthetic options strategy to increase both the underlying exposure and income potential.

Rather than using swaps or traditional daily-reset leverage mechanisms, the funds employ index options to create their amplified exposure over longer outcome periods, according to release. This approach typically results in lower financing costs than structures that reset daily.

Cinthia Murphy, director of research at VettaFi, said the products reflect growing investor demand.

“We’ve seen the massive appetite investors have for alternative sources of income, and that demand continues to grow,” Murphy said. “These new ETFs offer boosted exposure and boosted income potential.”

How the Strategy Works

For XSPI and XQQI, the funds hold portfolios of stocks that track their respective indexes while simultaneously selling call options to generate premium income, according to the prospectuses. The boosted component comes from buying call options and selling put options at similar strike prices, creating synthetic additional exposure to the indexes.

XBCI takes a different approach due to tax considerations, according to the prospectus. The fund holds spot bitcoin ETPs through a controlled foreign corporation subsidiary while using options on bitcoin-related instruments to create both its base and boosted exposures.

All three funds charge 0.98% in annual expenses and focus on Section 1256 index options, which receive favorable tax treatment with gains taxed as 60% long-term and 40% short-term regardless of holding period, according to the prospectuses.

The funds’ use of leverage means investors face magnified losses when markets decline, according to the prospectuses. Relatively small market movements can result in large changes in leveraged positions, with losses potentially exceeding the initial investment.

NEOS has restructured distribution payment schedules across its entire ETF lineup to offer investors potential weekly income, with different fund families paying out in different weeks of each month, according to the announcement. The Boosted High Income ETFs will distribute during the first week of the month.

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