Global X NASDAQ 100 Covered Call ETFNASDAQ: QYLD

The Global X Nasdaq 100 Covered Call ETF (QYLD) aims to generate income by selling call options on Nasdaq 100 stocks. QYLD offers monthly distributions and can provide protection during market downturns, but caps potential gains in strong bull markets. The fund's focus on tech stocks exposes it to sector-specific risks, and its higher expense ratio (0.61%) can impact net returns.

QYLD is a strong income-generating ETF but has limited upside potential due to its covered call strategy, leading to a perpetual share price decline. I am now neutral on QYLD, preferring ETFs like QQQI and JEPQ that allow for some capital appreciation while generating income. Despite QYLD's price erosion, it has achieved its goal of consistent monthly distributions, producing 98.82% of its initial share price in income.

My Long QYLD / Short Nasdaq 100 Futures combination remains viable for enhanced income, but has delivered mediocre results over the past three months due to big stock price moves. Implied volatility increases the return potential of this strategy, but reduced contango in the futures curve will nullify some of that. Investors who remain bearish, or who don't foresee material stock market upside, may wish to consider this unique income combination strategy.

This fund is well positioned to benefit from increasing volatility, and the VIX should rise significantly in the back half of the year for multiple reasons. QYLD ETF has an expense ratio of .61%, $8.8 billion in assets under management, and a trailing yield of 11.50%. The fund holds 51.58% in technology, 15.49% in communication, and monthly payouts are generated by selling at-the-money call options against the Nasdaq 100.

QYLD is an ETF that employs a covered call strategy on the Nasdaq index, giving away upside potential when the market rallies. The fund pays out monthly dividends with an 11% distribution yield, but lags behind the Nasdaq in terms of total return. For income generation with more upside potential, consider the Columbia Seligman Premium Technology Growth Fund (STK) as an alternative.

More restrictive interest rate environment has created a wider option space for yield-seeking investors to select the right assets. Yet, finding something that produces close to double-digit yield is not that easy and often times comes with a lot of risk. Covered call ETFs can offer both - abnormal income and relatively stable income profile.

Global X NASDAQ 100 Covered Call ETF offers an attractive combination of a high dividend yield and exposure to mega-cap technology stocks. It also pays out its distributions monthly. However, we share four reasons why it is a poor passive income machine.

The Global X NASDAQ 100 Covered Call ETF offers a high dividend yield above 11% and exposure to top companies. QYLD's option strategy limits upside potential but generates income through covered call writing. QYLD is best suited for investors prioritizing income and looking to complement their portfolio with additional diversification.

Global X NASDAQ 100 Covered Call ETF has gained popularity among investors for its covered-call strategy. However, the current dividend yield of ~11.6% may not be sufficient to compensate for the downside risks. The current option premium is relatively low (because of the low implied volatility) while downside risk is high given the elevated P/E of the Nasdaq index.