Looking to add exposure to the Nasdaq? The key market index, with its heavy focus on the information technology sector, can help investors lean more into some key growth-oriented firms in the U.S. and global economy. While growth stocks aren’t well-known for their dividends, innovative strategies have enabled investors to pursue growth and high levels of income at the same time. One covered call ETF, IQQQ, can provide a high income spin on Nasdaq-100 stocks.
See more: 3 Reasons to Add Income to Portfolios Now
The ProShares Nasdaq-100 High Income ETF (IQQQ ) launched in March 2024. It charges 55 basis points for its covered call strategy. The fund aims to provide a high level of income while targeting the returns of the Nasdaq-100. That has helped IQQQ provide investors a 10.2% 12-month distribution rate as of October 31, per ProShares data.
Astute observers of covered call ETFs likely know that traditional covered call ETFs can limit equities’ upside. If the fund’s underlying equities rally to the strike price of the written option, the fund offers no further upside for investors. For those investing in growth stocks to get that extra performance potential, then, how can a covered call ETF help?
Where many other covered call ETFs lean on so-called “traditional” strategies that use monthly expiring options, IQQQ is different. The Nasdaq-100ETF instead uses options that expire on a daily basis.. This important feature enables investors to seek both high levels of income and target a greater percentage of the returns of the Nasdaq-100 over time.
IQQQ has taken that approach and returned 18.5% YTD according to ETF Database data. While other funds have lost performance steam over the last three months, IQQQ has performed well, returning 8% in that time.
Looking ahead, then, IQQQ can help investors pursue both growth and income. Covered call ETFs have become very popular investing tools, and with its innovative approach, IQQQ could provide an upgrade therein.
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