The NEOS Nasdaq 100 High Income ETF (QQQI ) crossed its one-year milestone at the end of January. The fund continues to capture investor attention with its tax-efficient, income-oriented approach to tech investing and a trailing 12-month distribution rate of 13.76%.
QQQI launched January 30, 2024, and, one year later, it sits close to $1 billion in AUM. The fund holds $897 million in net assets as of February 6, following in the footsteps of the popular NEOS S&P 500 High Income ETF (SPYI ).
Notably, QQQI generated a distribution rate of 14.02% as of January 31, 2025. Distribution rate annualizes the most recent distribution and divides by the fund’s NAV. It’s a more forward-looking measurement of returns for investors, making QQQI an enticing addition to portfolios.
Since inception, QQQI is up 23.95% on a total returns basis, as of February 6, 2025. The fund is actively managed and provides exposure to the Nasdaq-100 Index, harnessing tech stock volatility for income. It uses a data-driven covered call options strategy designed to generate high income potential.
Covered calls entail buying an asset while also writing a call on the underlying asset. This generates a premium, but also caps the upside potential should the underlying asset appreciate. QQQI also uses a call spread to achieve its income goals. This spread allows for more of the underlying to potentially participate in upside market movements when they occur, compared to indexed covered call option strategies.
QQQI Offers Enhanced Tax-Efficiency When Tech Investing
In addition to potential upside capture, the fund offers layers of tax efficiency for income-oriented investors. The options that QQQI uses are call options on the NDX 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.
Should equities rise or fall, NEOS can actively manage 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.
QQQI has an expense ratio of 0.68%.
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