This Options Income ETF May Be Ready to Shine

As is the case with so many ETF segments, sometimes it’s potentially more rewarding to deploy options income ETFs. The current environment may be a prime example of one that highlights the benefits of these high income products.

After all, the S&P 500 and the Nasdaq-100 indexes are sporting year-to-date losses, indicating the downside protection that some covered call ETFs offer is an attractive trait. In this arena, one of the funds to consider is the Invesco QQQ Income Advantage ETF (QQA). To be clear, options income ETFs don’t provide 100% downside protection. However, funds such as QQA can earn their keep in sideways markets or at times when major equity indexes are experiencing modest declines.

“These funds can be a good fit for people looking for a more reliable, less volatile source of investment income and the stock market is in a relatively stable to sideways condition,” reported Raisin. “This fund generally won’t bring in high returns during a bull market. It’s also not the best choice if you can buy the fund’s stocks on your own for a lower price than the fund offers.”

QQA Sticks to the Basics

QQA, which turns two in July, has nearly $579 million in assets under management, indicating that in short order, the ETF has been a solid contributor to the rapid growth of options income ETFs. By some estimates, that corner of the ETF market is now home to more than $150 billion in assets under management.

Some of that growth has been powered by funds with jaw-dropping yields — yields that can be measured in percentages of 20, 30, and much more. However, there are downsides to those high-income products. First, some employ overly complex options strategies that many retail investors aren’t knowledgeable off. Second, some of the highest-yielding products in this space subject investors to significant net asset value (NAV) erosion because the income delivered is really return of capital.

QQA isn’t perfect, but it sticks to the basics of options-based income ETFs, and that’s a plus for investors looking for straight-forward alternative income.

“This fund seeks to provide investors exposure to the Nasdaq-100 Index combined with an active option income overlay for income generation, downside protection and upside participation,” according to the issuer.

And yes, QQA delivers the income goods, as highlighted by a 30-day SEC yield of 10.05%.

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