1. JPMorgan Equity Premium Income ETF
The JPMorgan Equity Premium Income ETF (JEPI +0.20%) is the largest covered call ETF on the market, with about $45 billion in assets under management. This ETF is actively managed and takes a more nuanced approach to generating income.
It starts with a portfolio of defensive, low-volatility stocks, aiming to reduce downside risk. These are selected from the S&P 500 index, but do not track it explicitly. But the ETF doesn't write covered calls directly on these stocks.
Instead, it allocates about 15% of its portfolio to equity-linked notes (ELNs), which are custom over-the-counter structured products that mimic the return profile of one-month out-of-the-money (OTM) covered calls on the S&P 500.
This approach allows this ETF to collect elevated options premiums while focusing on defense. JEPI paid a 8.38% distribution yield as of June 30, 2026, and charged a reasonable 0.35% expense ratio.
However, its structure comes with two key drawbacks. First, ELNs are not tax-efficient because they typically generate ordinary income, which is taxed at a higher rate than qualified dividends. Second, because ELNs are over-the-counter contracts, they carry counterparty risk. You're relying on the issuing bank to honor the payout.
