Are Covered-Call ETFs Worth It? QYLD, XYLD, JEPI and JEPQ, Tested

Covered-call ETFs are some of the most popular funds for income. JEPI and JEPQ hold about $90 billion between them. QYLD has paid out about 12% of its price over the last year, every month, like clockwork.

A yield like that sounds like free money. It isn't, and the question is what you give up for it. We checked every fund's real record against the index it sells calls on, then tested the strategy itself back to 2002.

What a covered-call ETF does

A covered-call ETF owns a basket of stocks and sells call options on them. Each call pays the fund some cash up front, called the premium. In return, the fund gives away any gain above the call's strike price until the option expires. If you're new to the trade itself, our guide to what a covered call is walks through one, with a worked example.

The fund pays most of that premium out to you, usually every month. That's where the big yield comes from. It isn't a dividend from the companies. It's mostly money from selling away the stocks' upside.

The difference matters. An at-the-money call gives away all the gain above today's price, on the whole fund. That's QYLD and XYLD. A slightly out-of-the-money call leaves some room to rise, and JEPI and JEPQ only sell calls against part of the fund. So they keep more of a rally.

Every fund made less than its index

Here's every covered-call fund we tested, from its first day of trading, against the plain index fund it's built on. Both columns include all payouts, reinvested.

All ten trailed. The gap was biggest for QYLD, which made 8.6% a year to QQQ's 19.0%. XYLD made 8.4% to SPY's 14.6%. The three newest, from 2023 and 2024, trailed by 2 to 3 points a year. They've only lived through a short, strong market.

Over 13 years, $10,000 in QQQ grew to $93,754. In QYLD, even with every payout reinvested, it grew to $28,876. That's about a third as much.

The yield isn't extra money

It's easy to look at a 12% yield and think of it as profit. It's really part of your own money coming back. QYLD's share price has fallen 27% since launch, while the Nasdaq-100 has climbed many times over. Global X says on its own fund page that the distributions likely include a return of capital.

The income hasn't grown either. Buy $10,000 of QYLD at launch, spend every payout, and you got $948 in 2014. In 2025 you got $815. Over the same years, a plain index fund's dividends rose with the companies' profits.

If you spend the income

Most people buy these funds to live on the payouts. So we tested exactly that. Put $10,000 in the fund and take every payout as cash. Then put $10,000 in the plain index fund and sell the same number of dollars on the same days. You get the same cash from both.

QYLD paid out $11,399 over 13 years and left you with shares worth $7,300. Taking the same $11,399 out of QQQ left $50,474. Same income, about 7 times as much left over.

It's the same story with the others, just smaller. XYLD left $10,415 against $33,281 in SPY. JEPI left $11,487 against $17,914. JEPQ left $11,633 against $14,040. You can make your own income by selling a few shares of an index fund, and in every case you'd have ended up with more.

Why: you keep most of the falls

A covered call caps the good months and barely softens the bad ones. In the months QQQ rose, QYLD made 2.4% on average against QQQ's 4.7%. In the months QQQ fell, QYLD lost 2.1% against 3.7%. It kept 50% of the rises and took 55% of the falls.

The big months are where it really costs you. In QQQ's 39 best months, the ones over +5%, QYLD made 3.5% on average. QQQ made 7.9%. Those months are where most of a stock market's long-run gain comes from.

The worst case is a crash followed by a fast recovery. The fund takes most of the fall, then the calls cap the bounce. In 2020, SPY made +18.3%. XYLD made −0.6%. Its fall in March 2020 was 33.5%, against 33.7% for SPY. Selling calls gave it no cushion when it needed one.

QYLD did lose less in 2022: −19.1% against −32.6%. That's the one year in this table it came out ahead. The next year QQQ made +54.9% and QYLD made +22.8%, and in 2020 QYLD trailed by 40 percentage points.

Testing the strategy back to 2002

The funds only go back to 2013. Cboe's S&P 500 BuyWrite Index (BXM) is the strategy on paper: own the S&P 500 and sell a one-month at-the-money call every month. XYLD tracks it. Cboe's daily record of it starts in March 2002, so it takes in the 2008 crash.

$10,000 in the S&P 500 with dividends grew to $106,494. In BXM it grew to $43,917. That's 6.2% a year against 10.1%, and that's before a fund's fees.

It was a smoother ride. BXM's daily swings ran at 14% a year against 19% for the S&P 500. Its worst fall, in 2008-09, was 40% against 55%. In 2008 itself, it lost 28.6% while the S&P lost 37.0%. Smaller, but nobody would call a 29% year safe.

The Nasdaq-100 version, BXN, tells the same story. From 2009 it made 8.7% a year. QQQ made 19.0%.

How often it beat the index

Hold it for one year and BXM came out ahead 24% of the time. Hold it for five and that fell to 19%. Hold it for ten and it was 2%. The longer you hold, the more the capped good months add up.

When covered calls do work

They win in flat, slow or falling markets. BXM beat the S&P 500 in five calendar years out of 23: 2007, 2008, 2011, 2015 and 2022. Those were years when stocks went sideways or fell. In 2022, BXM lost 11.4% against 18.1%.

A managed fund can do better than the index in those years. In 2022, JEPI lost 3.5% while SPY lost 18.2%. J.P. Morgan picks lower-volatility stocks for it, and only a slice of the fund sells calls. Its deepest fall since launch was 14%, against 25% for SPY.

They don't win in a crash with a quick recovery, like 2020. BXM made −2.8% that year while the S&P made +18.4%. And nobody can tell you in advance which kind of year is coming.

So, are covered-call ETFs worth it?

For long-term growth, the record says no. Every fund trailed its index, and spending the income left you with less than taking the same cash from an index fund. The big yield is mostly your own upside, sold off and paid back to you.

They can make sense for a narrower job. If you want a steadier ride, expect a flat market and don't mind giving up the big rallies, a low-fee fund like JEPI did what it promised: less volatility and smaller falls. Just know that's the trade you're making.

If you use one anyway

• Judge it on total return, not yield. A 12% payout means little if the share price falls.
• Compare it with selling a few index shares. Our test made the same income that way and kept far more.
• Prefer out-of-the-money designs if you want growth. At-the-money funds like QYLD give away the most upside.
• Check the fee. 0.35% against 0.60% adds up over a decade.
• Expect to keep most of a crash. XYLD fell 33.5% in 2020, and SPY fell 33.7%.
• Know how the payouts are taxed where you live. In many countries option income counts as ordinary income, which can mean a higher rate than dividends.

Outside the US

US-listed ETFs like these usually aren't sold to ordinary investors in the EU or UK, because they don't publish the key information document those rules require. London has UCITS versions instead: the Global X Nasdaq 100 Covered Call UCITS ETF (ticker QYLD, since 2022), the JPM Global Equity Premium Income Active UCITS ETF (JEPG, 2023) and the JPM Nasdaq Equity Premium Income Active UCITS ETF (JEPQ, 2024). They work the same way, so the same trade-off applies.

What this test can't tell you

• Most of these funds are young. JEPQ has under five years, and three funds started in 2023 or 2024, a strong stretch for stocks. A long flat market could look much better for them.
• BXM and BXN are indexes, with no fund fees or trading costs. A real fund would have done a little worse.
• The spend-the-income test sells index shares on the fund's payout dates. Selling costs and taxes aren't included, and they'd differ by country and account.
• The holding-period windows overlap, so they aren't independent results. Treat the shares as a guide, not as odds.
• Fees, assets and yields were checked on 2026-10-21 and change over time.