In a financial landscape where traditional yields are scarce, many investors are turning their attention towards option-based ETFs. These funds blend various underlying assets—such as stocks and cryptocurrencies—with derivative strategies to deliver regular income distributions. Notable players in this niche include the NEOs ETF family from NEOS Investments and the YieldMax ETFs, both of which aim to cater to income-seeking investors.
This article aims to delve into the differences between these two investment strategies, analyzing their characteristics, risks, and performance metrics. We will specifically highlight three prominent offerings from NEOs ETF: SPYI, QQQI, and BTCI, shedding light on their individual strategies and outcomes.
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Understanding the NEOs ETF and YieldMax ETFs
YieldMax ETFs focus on high-volatility assets, such as Tesla and MicroStrategy, by utilizing a strategy of systematically writing call options to generate income. According to InvestmentU, these funds do not hold the underlying stocks directly, but rather use derivatives to mimic long positions, generating income through the sale of call options.
While the yields offered by YieldMax ETFs can be enticing, they come with the risk of potential erosion of Net Asset Value (NAV). This risk heightens especially when the underlying asset’s price experiences unfavorable movements. A recent analysis from InvestmentU emphasizes that while these funds may promise spectacular returns, they often come with increased volatility and concentration risks.
NEOs ETF Approach
Conversely, the suite of NEOs ETFs employs a different approach by combining broad market indices, such as the S&P 500 or Nasdaq-100, with options strategies designed to augment income through premium harvesting. This broader investment base typically incurs lower volatility and concentration risks compared to the single-stock focus of YieldMax ETFs, although the complexity of the derivative overlays remains.
Industry experts warn that yields that significantly exceed what the underlying market can sustain may not be sustainable over the long term. This suggests that some funds might return capital merely to uphold distribution promises, which could lead to detrimental outcomes for investors.
Examining Key Offerings: SPYI, QQQI, and BTCI
SPYI: A flagship income generator
One of the standout products from NEOS is the SPYI ETF, which targets the S&P 500 index while employing covered call options to generate monthly income. Since its inception in August 2022, SPYI has demonstrated an annualized return of approximately 14.08% as of August 2025. This performance is reflected in its market price returns, which closely align with its NAV.
While SPYI offers appealing distribution yields compared to conventional equity income funds, a significant portion of its distributions is classified as Return of Capital (ROC), which can affect the cost basis over time. The fund’s strengths lie in its broad U.S. equity exposure and lower concentration risks, but investors should be aware of potential downsides such as capped gains in bull markets and complexities in tax planning due to ROC-heavy distributions.
QQQI: Targeting technology growth
The QQQI ETF represents another innovative option from NEOS, providing exposure to the Nasdaq-100 index along with option strategies that aim for higher yields. Launched in January 2024, QQQI has shown robust nominal returns compared to SPYI, particularly in favorable market conditions.
However, this comes at the expense of increased volatility, as evidenced by its higher standard deviation and greater drawdowns. Investors interested in this ETF should consider its concentrated sector risk, particularly in technology, as well as the same ROC-related tax implications faced by SPYI.
BTCI: Entering the cryptocurrency realm
NEOs also ventured into the cryptocurrency market with the BTCI ETF, which focuses on Bitcoin exposure through various proxies and applies options strategies for income generation. Launched in October 2024, BTCI has approached a distribution rate of approximately 28% as of August 2025, with substantial cumulative returns since its inception.
However, investors must remain cautious about the tax implications, as around 95% of its distributions are estimated to be ROC. The inherent volatility of Bitcoin is another critical factor to consider, as well as the complexities involved in options strategies within the less mature cryptocurrency derivatives market.
Conclusion: Weighing the options
While SPYI and QQQI often exhibit high correlation in their movements, which limits hedging benefits when used together, BTCI can provide diversification from equities at the cost of increased volatility. For those focused on generating income, all three ETFs present enticing opportunities, albeit with trade-offs like capped upside potential and ROC erosion.
In bullish markets, traditional equity ETFs may outperform due to the absence of drag from options overlays. Therefore, for investors seeking to integrate these options-based ETFs into their portfolios, it’s advisable to view them as part of an income-generating strategy rather than core equity holdings. Furthermore, considering their heavy ROC distributions, holding them in tax-advantaged accounts may be more beneficial.