How to invest in covered call ETFs

How do I invest in covered call ETFs?

Covered call ETFs offer investors the opportunity to generate regular income from a stock portfolio that goes beyond traditional dividend payments. The strategy is based on two pillars: The ETF holds a portfolio of stocks (the "covered" part) and simultaneously sells call options (calls) on these assets or the corresponding index. In exchange for the promise to sell the stocks if they reach a certain price, the ETF receives a fee – known as the option premium. This premium is either distributed directly to investors or reinvested. As a result, the ETF converts potential capital growth into immediate cash flow and smooths out the portfolio's performance.

Performance Compared to the Benchmark

A covered call ETF performs differently compared to its underlying index depending on the market phase:

• Outperformance (sideways markets): In stagnant or slightly fluctuating markets, the ETF plays to its strengths. While the benchmark yields no capital gains, the ETF generates a positive return through the collected option premiums and outperforms the index.
• Risk Buffer (bear markets): When prices fall sharply, the ETF also loses value; however, the premiums act as a buffer. Consequently, the loss is lower than that of a pure index investment.
• Underperformance (bull markets): During strong upward phases, the ETF lags behind the benchmark. Since capital gains are "capped" by the sold options, the investor no longer participates in the rally once a certain threshold is reached.

In conclusion, a covered call ETF outperforms the underlying benchmark index in two out of three cases (in falling and sideways-trending markets). However, the ETF buys this downside buffer by giving up a portion of the maximum upside performance in return. While the market for covered call ETFs is still a niche compared to the overall market, it is experiencing dynamic growth due to the increasing demand for cash-flow strategies. In this ETF guide, you will find all currently available covered call ETFs.

When choosing a covered call ETF one should consider several other factors in addition to the methodology of the underlying index and performance of an ETF. For better comparison, you will find a list of all covered call ETFs with details on size, cost, age, income, domicile and replication method ranked by fund size.

Compare all covered call ETFs in detail
Compare all covered call ETFs in a chart

Source: justETF.com; As of 31.08.26

Return comparison of all covered call ETFs

The table shows the returns of all covered call ETFs in comparison. All return figures are including dividends as of month end. Besides the return the reference date on which you conduct the comparison is important. In order to find the best ETFs, you can also perform a chart comparison.

• Cumulative
• Calendar year

Source: justETF.com; As of 31.07.26; Calculations in EUR including dividends