Tech investors seeking tax-efficient income while hedging for drawdowns would do well to consider the NEOS Nasdaq-100 Hedged Equity Income ETF (QQQH ). The fund offers a measure of downside protection within the Nasdaq-100 and recently updated its ticker.
QQQH formerly traded under the ticker NUSI. The strategy underwent a revamp at the end of last year that allows it to offer the potential for more active downside mitigation in declining markets. The recent ticker change fully aligns the fund with the rest of the NEOS Income Options ETF Suite, which includes the NEOS S&P 500 High Income ETF (SPYI ) and the NEOS Nasdaq 100 High Income ETF (QQQI ).
See more: Troy Cates on the Recent Strategy Restructure for NUSI
QQQH also generated a distribution rate of 9.01% as of February 28, 2025. Distribution rate annualizes the most recent distribution and divides by the fund’s NAV at the time of distribution. It offers a forward-looking estimate of what investors would receive should distributions hold steady over the course of a year.
Under the Hood of QQQH's Hedged, Options Income Strategy
The actively managed QQQH invests in the Nasdaq-100. It also uses a put spread option 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. However, these puts are closer to the money than the original strategy. 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.
The fund offers tech investors the potential for downside protection in declining markets, and income investors the potential to capitalize on tech volatility. During periods of heightened volatility, options writing strategies earn higher premiums. QQQH also offers layer of tax efficiency for investors.
The options that QQQH uses are index options on the Nasdaq-100 and 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 also 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.
QQQH has a net expense ratio of 0.68%.
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