Advisors and investors feeling a degree of uncertainty about U.S. growth and tech stock performance looking ahead would do well to consider the NEOS Nasdaq-100 Hedged Equity Income ETF (QQQH ). The fund generates notable performance while offering downside mitigation in challenging market environments.
A number of risk factors create a diminished outlook for U.S. equities in the months ahead. Tariff impacts, volatile and unpredictable U.S. trade and economic policies, a weakening dollar, and more make international equities an increasingly attractive buy. Given potential challenges to U.S. growth, hedging for downside risk within the technology sector — a main U.S. growth driver — could prove beneficial.
The actively managed NEOS Nasdaq-100 Hedged Equity Income ETF (QQQH ) combines Nasdaq-100 investing with an option strategy that creates downside mitigation and earns income. The fund offers the potential for downside protection in declining markets while also capitalizing on tech volatility.
In 2024, QQQH was in the top quartile for returns within the Morningstar U.S. Fund Derivative Income category. Currently, the fund’s NAV is 5.23 year-to-date as of July 3, 2025 per Morningstar data. This compares to the current Morningstar U.S. Fund Equity Hedged category’s average NAV of 4.66.
The fund originally got its start in 2019 under the NUSI ticker. However, NEOS acquired the fund in November 2024 and has since tweaked the strategy alongside a rebrand. Since the firm acquired the fund, QQQH has generated notable performance compared to the Nasdaq-100.
QQQH Combines Downside Mitigation, Income, and Tax Efficiency
During periods of heightened volatility, options writing strategies earn higher premiums. Currently the fund as a distribution rate of 9.59% as of June 30, 2025. Distribution rate annualizes the most recent distribution and divides by the fund’s NAV. It’s a forward-looking measurement of what an investor might earn over the next 12 months should distributions remain the same.
The fund combines Nasdaq-100 exposure with a put spread collar on index options on the Nasdaq-100. This entails writing calls to earn premiums for the fund, used for both income generation and to fund the purchase of out-of-the-money put spreads. At the same time, the fund also sells far-out-of-the-money puts to fund the put purchases as well as to generate income for the fund.
QQQH also offers a layer of tax efficiency for investors. The options that QQQH uses are index options on the Nasdaq-100 that qualify as Section 1256 contracts. These receive favorable tax treatment under IRS rules. The 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 at 60% long-term and 40% short-term, no matter how long they were held. A portion of the income earned from premiums also qualifies as a return on capital, providing tax deferment opportunities.
NEOS actively manages the call options to capture gains in the underlying assets or minimize losses. In addition, the fund’s managers also engage in tax-loss harvesting opportunities throughout the year on the call options, equity holdings, or both.
NEOS offers a similar strategy for S&P 500 investors. The NEOS S&P 500 Hedged Equity Income ETF (SPYH ) seeks to deliver reliable income within the S&P 500 while reducing downside risks. Both funds carry an expense ratio of 0.68% and complement existing core portfolio exposures.
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