Tax-Loss Harvesting? Get More From Current Income in Daily Covered Call ETFs

As 2025 draws to a close, investors and advisors will be considering their tax-loss harvesting opportunities. By selling some investments at a loss, those investors can reduce their overall tax bills next year. Covered call ETFs may offer particular opportunities for tax-loss harvesting that differ from other investments. That means more opportunities to upgrade to ETFs offering daily covered call strategies. 

See more: What Makes a Good Covered Call Strategy

To start, it may be worth revisiting how tax-loss harvesting works. As mentioned above, selling an investment at a loss can help offset capital gains taxes from selling other investments at a profit. The end of the year is a popular time to start considering tax-loss harvesting.

Tax-Loss Harvesting in 2025

Covered call ETFs could be worth considering for a tax-loss strategy even when they’re in the black. Covered call ETFs can potentially make taxable distributions in excess of their total returns. And that could produce a negative price return, and thus an opportunity to tax-loss harvest. 

Investors and advisors in traditional covered call strategies — those that use a monthly option strategy — can then reinvest those proceeds to a covered call ETF that uses a daily options strategy to potentially capture more equity upside.  

Traditional covered call ETFs have historically given up a significant amount of total returns in exchange for high levels of income. If a monthly covered call ETF’s underlying stocks rally through the strike price of the sold option early in the month, the fund can’t provide any further gains for the rest of the month. 

That has seen some covered call ETFs disappoint in a year marked by major rallies. Covered call ETFs that use a daily options strategy can potentially generate high levels of income while also targeting the returns of the equity market. With a daily options strategy, investors  can improve the trade-off between income and total returns. 

So long as investors avoid the “wash sale” rule, tax-loss harvesting can both reduce cap gains taxes and offer a chance to swap into an ETF like the ProShares S&P 500 High Income ETF (ISPY). The fund charges a 55 basis point fee to provide a daily covered call approach to stocks in the S&P 500. 

The ETF has returned 13.5% YTD, according to ETF Database data, beating its ETF Database Category average in that time. What’s more, it has also provided a healthy 9.8% 12-month distribution rate, as of September 30, per ProShares’ data. Looking ahead, such daily covered call ETFs may be worth a closer look for curious investors.

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