Three overlay ETFs focusing on options are offering impressive double-digit annual distribution rates, but many income investors haven’t explored them yet. The YieldMax Ultra Option Income Strategy ETF (NYSEARCA:ULTY) distributes around 50% annually through weekly payments. On the other hand, the NEOS Nasdaq-100 High Income ETF (NASDAQ:QQQI) and the NEOS S&P 500 High Income ETF (CBOE:SPYI) employ tax-efficient call-writing strategies to provide monthly payments that also reach double digits while still keeping exposure to the relevant indices.
These three funds tackle the challenge of turning equity volatility into cash in very distinct ways. ULTY capitalizes on premiums from highly traded single stocks, while the NEOS funds utilize broader index options for call writing, which benefits from Section 1256’s 60/40 tax treatment. Ultimately, your choice here hinges on how much risk to principal you’re willing to trade for yield.
Why are these option income ETFs gaining popularity?
Ongoing volatility in the stock market through 2025 and 2026 is likely to enhance option premiums, fueling growth for these funds. SPYI has amassed about $10 billion in assets, while ULTY has grown to approximately $872 million, both showing significant growth from the previous year. The approach is straightforward: gather option premiums, return them to shareholders, and keep enough exposure to the market to gain when it rises. However, not every fund in this category successfully fulfills that latter promise.
ULTY: Weekly payouts from volatile stocks
ULTY stands out positively due to its structural strategy. It uses a comprehensive covered call approach, focusing on the most volatile and heavily traded U.S. stocks. Just look at its top holdings: Astera Labs, IREN Limited, AMD, Fortinet, Coherent, and Palantir, as well as others like Robinhood and VanEck Gold Miners ETFs. These stocks are characterized by high implied volatility, often much higher than that of the S&P 500, which contributes to their attractive yields.
Recent dividend payouts have hovered around $0.39 to $0.40 per share, leading to an expected distribution of about $1.59 over four weeks, given the current share price near $32. This translates to an approximate distribution rate of 50%, down from over 80% during the fund’s highly active launch in 2024. Its expense ratio stands at 1.30%, which is on the high side, indicating the costs of active management.
However, YieldMax investors may notice a downside—lower net asset value (NAV). Over the following year, ULTY’s total return has been about 10% on a price-adjusted basis, hinting that most of the income was offset by a relatively stable principal. Funds with significant positions in quantum computing and similar fields may see NAV appreciation if those stocks perform well. It’s best to view ULTY purely as a high cash flow option.
QQQI: Nasdaq 100 exposure and decent returns
QQQI sits in the middle ground, appealing to those interested in tech without diving too deep. It holds the Nasdaq-100 basket and employs a systematic call-writing strategy using NDX index options. Because NDX qualifies under Section 1256, gains from the options are taxed at a blended rate, and part of the monthly distribution often counts as a return of capital, delaying tax liabilities.
Over the past year, QQQI has disbursed 12 monthly payments ranging from about $0.53 to $0.66 per share, with the most recent one in May 2026 being $0.6589. With shares priced near $58, that gives a distribution rate just under 14%. Interestingly, QQQI’s stock price has increased by about 32% over the past year, adding real value to NAV. Its expenses are 0.68%.
The challenge here is that if the Nasdaq rises, QQQI might lag due to its short calls, which take some of the bullish momentum. But this trade-off is common; for those wanting Nasdaq exposure without being stuck in a non-dividend growth fund, it’s a reasonable compromise.
SPYI: The conservative choice
SPYI is the flagship option in the NEOS lineup for the S&P 500, managing around $10 billion in net assets since its launch in August 2022. The fund owns index constituents directly while employing a systematic call-writing strategy on SPX index options, benefiting from the same 1256 tax treatment as QQQI.
These monthly distributions remain steady. In May 2026, SPYI plans to pay $0.5353 and will typically range from $0.46 to $0.56 per share monthly starting in 2024. With a stock price around $54, that results in a nearly 11.5% distribution ratio. Since inception, the fund has seen a 73% return, significantly outperforming a total return of 24% over the past year. This indicates that the call-writing hasn’t hampered revenue generation. Its expenses align with QQQI at 0.68%.
Like QQQI, SPYI is likely to lag during bull runs of the S&P 500 as some upside is given up monthly. For retirees looking for income from tax-advantaged accounts, though, this often proves worthwhile given the consistent monthly payouts and favorable tax treatment.
Which option suits you best?
Think of these three options as tools for various needs. ULTY is aimed at those seeking the highest cash distributions while accepting the likelihood of stagnant or even declining stock prices. The real figures of 50% annualized returns come with concentration risks in certain stocks.
SPYI serves as a core holding in this arena, reflecting the real S&P 500 and providing monthly yields near 12%, all while offering tax advantages—making it a strong choice in retirement planning. Meanwhile, QQQI appeals to those wanting exposure to Nasdaq, prepared for steeper gains and potential drawdowns. Holding both NEOS funds along with a smaller ULTY position creates a diverse portfolio, benefiting from the stable returns of SPYI and QQQI while allowing ULTY to capitalize on volatility in individual stocks.
