As the search for income intensifies in a low-yield environment, many investors are increasingly drawn towards option-based ETFs. These funds utilize a combination of underlying assets, such as equities or cryptocurrencies, alongside derivative strategies—often involving the writing of covered call options—to provide consistent distributions. Among the notable players in this arena are NEOs ETF and YieldMax ETFs, each representing distinct approaches to income generation.
While the potential for high returns is enticing, it is crucial to understand the differences in the mechanics, associated risks, and tax implications of these funds. This article will delve into a comparative analysis of NEOs ETFs and YieldMax ETFs, focusing on three flagship products: SPYI, QQQI, and BTCI. We will explore their performance metrics, yield characteristics, risk profiles, and optimal investment scenarios.
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Understanding YieldMax ETFs
YieldMax ETFs focus on high-volatility assets, including stocks from companies like Tesla and MicroStrategy, and employ a systematic strategy of writing call options. According to insights from InvestmentU, these ETFs do not directly own the underlying stocks. Instead, they use derivatives to create a synthetic long exposure, subsequently generating income through the sale of call options. This strategy can lead to very high yields, but it is important to note that such yields come with significant risks, including potential erosion of net asset value (NAV) if prices of the underlying assets decline.
Risks and Returns of YieldMax ETFs
While high yields can be appealing, they often come with the caveat of increased volatility and concentration risk. InvestmentU highlights that while spectacular returns may be achievable, they are often accompanied by the dangers of market concentration and unpredictable price movements. Investors should approach these ETFs with caution, as yields significantly exceeding the typical market returns may not be sustainable over the long term.
Exploring NEOs ETFs
In contrast, the NEOs ETF family from NEOS Investments takes a broader approach. These funds typically combine major benchmarks or crypto assets like the S&P 500, Nasdaq-100, and Bitcoin with option strategies aimed at harvesting premiums and delivering monthly income. The broader asset base can help mitigate some concentration and volatility risks associated with single-stock investments, although the complexities introduced by derivatives remain.
Key Products of NEOs ETFs
The flagship product, SPYI, launched in August 2022, aims to provide high income through a combination of the S&P 500 index and option overlays, mainly through covered calls. Since its inception, SPYI has maintained an impressive annualized return of approximately 14.08% as of August 2025. The fund’s distribution yield is notably attractive compared to traditional equity income funds, although a significant proportion of its distributions may be categorized as Return of Capital (ROC), which can erode the cost basis over time.
Another noteworthy fund is QQQI, which focuses on the Nasdaq-100 index and utilizes similar option strategies. Although it was launched later in January 2024, QQQI has demonstrated stronger nominal returns compared to SPYI in several periods, but it also carries higher volatility and deeper drawdowns. The performance metrics indicate that QQQI typically experiences greater standard deviations and maximum drawdowns than SPYI.
NEOs ETF in the Crypto Space
The BTCI ETF represents NEOS’s foray into the cryptocurrency market, offering exposure to Bitcoin through exchange-traded products (ETPs) while applying option strategies to generate monthly income. Since its launch in October 2024, BTCI has garnered significant attention due to its high distribution rate, which neared 28% as of August 2025. Its cumulative returns have been robust, approaching a 49.5% increase in NAV since inception; however, it is crucial to note that a substantial portion of these distributions is estimated to be ROC, complicating tax considerations.
Evaluating the Risks of BTCI
The inherent volatility of Bitcoin poses a unique challenge for BTCI. While the option overlay may provide some level of protection against swings in the market, it cannot fully shield investors from significant price fluctuations. Furthermore, the complexities associated with options on cryptocurrencies, including less mature derivatives markets, can present additional risks.
Conclusion: Choosing the Right ETF
For income-driven investors, both the NEOs and YieldMax ETFs present compelling options, yet each comes with its own trade-offs in terms of risk, yield sustainability, and tax implications. In general, the NEOs suite, including SPYI, QQQI, and BTCI, tends to deliver a more stable income profile with broader market exposure, while YieldMax ETFs offer higher yields at the expense of greater volatility. Ultimately, investors must align their choices with their risk tolerance and income objectives.