Volatility remains a market mainstay of the last few years, creating challenges and opportunities for investors. While the forward-looking path of inflation and interest rates continues to be uncertain, volatility will likely linger. In such an ongoing environment, it’s little surprise that options strategies flourished. With their ability to hedge for risk or use volatility for potential income, investors continue to flock to these strategies and their stories.
It’s an environment that NEOS Investments thrives in. The firm expanded their options income ETF lineup significantly this year, providing investors with greater access to the firm’s tax efficient income strategy across more asset classes. Comprised of pioneers of options ETFs, the tax-efficient approach to investing while providing high monthly income continues to appeal to investors.
Boosting Tech Investing, Enhancing Tax-Efficient Income
Of the funds launched this year, the NEOS Nasdaq 100 High Income ETF (QQQI ) proved incredibly timely. Launched at the end of January, the fund drew strong interest and inflows in a year dominated by ongoing tech gains. It’s no surprise that a piece highlighting the fund’s yields at six months, along with the upside capture (a difficult feat in covered call strategies), proved most popular this year.
QQQI currently boasts over $700 million in AUM. The fund invests in the Nasdaq-100 and writes call options on the NDX that receive favorable tax treatment. It also uses call spreads that allow more of the underlying to participate when markets rise, a boon in a year of strong tech performance.
Read: At 6 Months, QQQI Offers Notable Yields and Upside Capture
Meanwhile, tax efficiency holds timeless appeal for advisors and investors. For those seeking to make the most of their income streams, the NEOS ETFs offer opportunity. Almost all of the funds use index options in their strategy. These options qualify as Section 1256 Contracts that are taxed at 60% long-term and 40% short-term capital gains, regardless of how long they were held. Given the firm’s expansion of its ETF lineup this year, investors now have a variety of exposures to choose from when enhancing tax efficiency through NEOS’s strategies.
SPYI Soars, Bonds Become Attractive Again
This year proved a phenomenal one for the NEOS S&P 500 High Income ETF (SPYI ). The fund smashed through $1 billion, and then $2 billion, and is currently well on its way to $3 billion in AUM. It offers exposure to the S&P 500 while increasing income potential through its options overlay on the SPX. The fund boasts a distribution rate of 12.10% as of November 30, 2024, that annualizes the most recent distribution and then divides by the fund’s NAV.
Read: Options Income ETF SPYI Crosses $1 Billion AUM
Advisors and investors sought attractive opportunities within bonds this year, with yields reaching near 20-year highs in Treasuries. The onset of interest rate cuts by the Fed also reduced rate risk, making longer-duration bonds more appealing to investors for the first time in two years. It led to a year of considerable activity within bonds and it’s no surprise that the fourth most read piece centered on enhancing existing bond exposures.
The NEOS Enhanced Income Aggregate Bond ETF (BNDI ) combines bond investing with equity options call writing. It results in a fund with differentiated performance potential and a diversified income stream for a bond portfolio.
Read: Complement Your Core Bond Exposure With This Income ETF
For more news, information, and analysis, visit the Tax Efficient Income Channel.
