Covered-Call ETFs Are Booming. But Not All Yield Is Good
These popular vehicles produce higher income—at a cost. Here’s what to know about the trade-offs, plus one solid choice for investors.
Daniel Sotiroff, senior manager research analyst for Morningstar Research Services, explains how covered-call ETFs work along with the popular investment’s risks and rewards.
00:00 Introduction
00:47 What are covered-call ETFs, and how do they work?
02:03 Why are retirees and other income investors drawn to these ETFs? What’s making them so popular this year?
02:41 Their yields look very high. What is driving them?
04:05 What types of trade-offs are investors making?
05:24 ETFs are known to be tax-efficient investments. What are the tax considerations for covered-call ETFs?
06:31 Should you hold covered-call ETFs in a taxable or tax-deferred account? What’s the optimal retirement account to hold covered-call ETFs?
07:19 Let’s talk about covered-call ETF performance in 2025. What have you’ve seen?
09:02 Which covered-call ETFs do Morningstar analysts consider a solid choice for investors, and why?
Read about topics from this episode.
Should You Own a Covered-Call ETF Like JEPI? https://www.morningstar.com/funds/should-you-own-covered-call-etf-like-jepi
Is It Time to Reconsider Dividend Funds? https://www.morningstar.com/funds/is-it-time-reconsider-dividend-funds
3 Great ETFs for Jittery Markets https://www.morningstar.com/funds/3-great-etfs-jittery-markets-2
Covered-Call and Buffer ETFs: Stock Investing With Less Gain but Less Pain https://www.morningstar.com/funds/covered-call-buffer-etfs-stock-investing-with-less-gain-less-pain
Covered-Call and Buffer ETFs: Do the Pros Outweigh the Cons? https://www.morningstar.com/funds/covered-call-buffer-etfs-do-pros-outweigh-cons
100% Downside Protection ETFs: What’s the Catch? https://www.morningstar.com/funds/100-downside-protection-etfs-whats-catch
Our 2025 ETF Predictions: A Midyear Review https://www.morningstar.com/funds/our-2025-etf-predictions-midyear-review
Covered-Call Stock Funds Like JEPI Are Popular. Should They Be? https://www.morningstar.com/columns/rekenthaler-report/covered-call-stock-funds-like-jepi-are-popular-should-they-be
The Active ETFs That Led Inflows During 2025’s First Half https://www.morningstar.com/funds/active-etfs-that-led-inflows-during-2025s-first-half
5 Charts on How Tariff Trouble Rocked US Fund Flows https://www.morningstar.com/funds/5-charts-how-tariff-trouble-rocked-us-fund-flows
Investors, Be Careful When Buying New ETFs https://www.morningstar.com/funds/investors-be-careful-when-buying-new-etfs
Tax-Efficient Retirement-Bucket Portfolios for ETF Investors https://www.morningstar.com/portfolios/3-etf-retirement-bucket-portfolios-taxable-accounts
25 Top Picks for Tax-Efficient ETFs and Mutual Funds https://www.morningstar.com/funds/25-top-picks-tax-efficient-etfs-mutual-funds
How to Maximize the Tax Efficiency of an ETF Portfolio https://www.morningstar.com/funds/how-maximize-tax-efficiency-an-etf-portfolio
3 Great ETFs for an IRA in 2025 https://www.morningstar.com/funds/3-great-etfs-an-ira-2025-2
The Best ETFs and How They Fit in Your Portfolio https://www.morningstar.com/funds/best-etfs-how-they-fit-your-portfolio
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Read what our team is writing.
Daniel Sotiroff https://www.morningstar.com/people/daniel-sotiroff
Ivanna Hampton https://www.morningstar.com/people/ivanna-hampton
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