Options income strategies remain popular as market volatility persists heading into the summer months. The NEOS S&P 500 High Income ETF (SPYI ) continues to prove popular with investors seeking to maximize tax-efficient S&P 500 income while also benefiting from volatility.
SPYI offers exposure to the S&P 500, while generating high monthly income through call options. It remains a popular fund for investors, with over $3.5 billion in AUM as of May 21, 2025. The fund netted over $1 billion in AUM this year, according to FactSet data as of May 21, 2025.
SPYI Offers High Income and Tax Efficiency Within the S&P 500
The strategy entails investing in the S&P 500 and using money earned from written calls to buy long, out-of-the-money call options on the S&P 500 Index. An out-of-the-money call option has no intrinsic value. That’s because the underlying asset’s current price is below the call’s strike price. The fund currently offers a distribution rate of 12.11% as of April 30, 2025. Distribution rate annualizes the most recent distribution and divides it by the fund’s NAV at time of distribution. It’s a forward-looking estimate of what an investor would earn if distributions hold steady.
Should equities rise or fall, NEOS can actively manage the call options to capture gains in the underlying assets or minimize losses. Elevated volatility general benefits call-writing strategies, as they earn higher premiums in volatile environments.
SPYI also offers layers of tax efficiency for investors. The fund uses index options, which receive favorable tax treatment as Section 1256 Contracts under IRS rules. Options held at year’s end are treated as if sold at fair market value on the last market day. Any capital gains or losses are taxed as 60% long-term and 40% short-term, no matter how long investors hold them. This can offer noteworthy tax advantages.
A portion of distributions may also qualify as return on capital (ROC). ROC distributions occur when some, or all, of an initial investment is returned. Some options strategies generate ROC as a return on the premiums earned instead of returning principal.
SPYI’s managers also engage in tax-loss harvesting opportunities throughout the year on the call options, equity holdings, or both. The fund has an expense ratio of 0.68%.
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