Can you really earn over 100% in annual dividends just by holding certain ETFs?
Covered call ETFs — especially the newer, single-stock strategies — have been making waves for offering 50%–150% dividend yields.
But before you jump in chasing massive payouts, it’s important to understand how they work, what the risks are, and where these yields come from.
If you’re using a platform like Sharesies, you’ve probably already seen some of these ETFs in the U.S. market section. And yes, that’s my referral link — if you sign up through it, we both get $5 to invest.
🧠 Covered Call ETFs Explained: What Are They?
A covered call ETF is a fund that buys stocks and uses a strategy called covered calls to generate extra income.
Here’s how it works in simple terms:
- The ETF buys stocks (like Tesla, AMD, Apple)
- It then sells call options — contracts that give others the right to buy those stocks at a set price
- In exchange, the ETF collects a fee (called a premium), which it pays to investors as dividends
It’s like earning “rent” on your stocks, and that rent shows up as cash flow for shareholders.
Understanding this structure is one of the most important parts of covered call ETFs explained properly — because the yield doesn’t come from the company’s profits, it comes from selling options contracts.
That distinction matters a lot when you’re assessing risk.
💸 Covered Call ETFs Paying 50%–150% Yields
Some of the newer ETFs using this strategy target individual, high-volatility stocks — which means they can collect huge premiums and pass that on as dividends.
Examples include:
- YTSL – YieldMax TSLA Option Income Strategy ETF
- YAMD – YieldMax AMD Option Income Strategy ETF
- YLYB – YieldMax LYFT Option Income Strategy ETF
These ETFs have reported annualized yields of 50%–150% based on trailing 12-month distributions.
But high yield doesn’t always mean high returns.
📊 How Are These Yields Calculated?
Let’s say an ETF pays $0.80 in monthly dividends and the share price is $10:
- $0.80 x 12 months = $9.60 in annual income
- $9.60 ÷ $10 share price = 96% yield
That sounds amazing… but what if the share price drops to $6? The yield stays high, but your capital is down 40%. This is the part that doesn’t make the headlines — and it’s exactly the kind of thing worth stress-testing before you invest.
Speaking of which — if you want to research specific covered call ETFs before committing, I put together an Ultimate Stock Market Prompt Pack that turns any AI model into a proper stock research assistant.
It normally retails at $29, but was free or pay-what-you-can at the time of writing.
It includes prompts specifically designed for evaluating ETF yield sustainability, capital erosion risk, and total return — exactly what you need here.
⚠️ Risks of Covered Call ETFs
Before you load up on high-yield ETFs, make sure you understand the trade-offs. This is the part most people skip when they first encounter covered call ETFs explained in glossy marketing material.
Capital Erosion
Covered calls limit upside gains. If the underlying stock rallies, the ETF might miss most of that growth. Over time, this can lead to price stagnation or erosion.
High Yield Doesn’t Mean High Return
You could receive $8 in dividends but lose $12 in share value. Always look at total return — not just income.
This is a lesson that took me a while to learn, and it’s one of the reasons I’d recommend reading how someone turned $500 into $230,000 — the mindset around total return vs. chasing income is a thread that runs through the whole story.
Dividend Fluctuation
Distributions can vary based on options premiums and market volatility. They’re not fixed or guaranteed.
Tax Treatment
Dividends may be taxed as regular income, not long-term capital gains. This can affect your actual net return depending on your situation.
✅ Should You Invest in High-Yield Covered Call ETFs?
These ETFs may suit:
- 🟢 Investors looking for aggressive income strategies
- 🟢 People who understand volatility and risk
- 🟢 Traders looking for short-term premium capture
They’re probably not a fit if you want:
- 🔴 Long-term growth-focused investing
- 🔴 Stable, reliable dividends
- 🔴 “Set and forget” passive investing
Where they fit best is as one component of a broader strategy — not the whole thing. If you’re still building the foundations of that strategy, these 3 steps to financial freedom in 3 years are a useful frame for thinking about where high-income ETFs fit relative to growth assets and savings.
📍 How to Get Started with Covered Call ETFs
If you’re ready to explore covered call ETFs — including high-yield options and more conservative ones like QYLD, XYLD, and JEPI — you can find them in the U.S. markets section of Sharesies.
If you’re not already on Sharesies, here’s a full guide to getting started with Sharesies — it covers the sign-up process, how to find ETFs, and what to expect as a first-time investor.
Use my referral link to sign up — we both get $5 to invest: 👉 https://sharesies.com/r/KRX3W3
🧠 Final Thoughts
Covered call ETFs paying 100%+ in dividends might sound too good to be true — and sometimes they are. But they can also play a role in a balanced strategy if you understand the risks and use them wisely.
My advice? Start small. Learn as you go. And always focus on total return, not just high numbers on paper.
Want more guides like this? Follow along at Wealth Foresight — and if you want to get sharper at researching any investment before you buy, the Ultimate Stock Market Prompt Pack is the tool I’d start with.
Further Reading
Here are all the resources and related posts mentioned in this article:
Tools & Resources
- Sign up to Sharesies (+ get $5 free)
- Ultimate Stock Market Prompt Pack — Turn Any AI Into a Stock Research Assistant (normally $29 — free or pay-what-you-can at time of writing)
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