MW This income-investing approach from Goldman Sachs has been paying off
By Philip van Doorn
The firm's covered-call ETFs have been outperforming competitors
Covered-call ETFs can provide high monthly income in return for giving up some of the stock market's upside potential.
Investors need to alter their strategies as their objectives change over the years. If you are near the beginning of a multidecade career, a strategy of making regular investments, mainly in stocks, might be your best approach for long-term growth. But if you need to boost your monthly income and still want higher returns than you can get in the bond market, you should at least become familiar with funds that use covered-call strategies.
A covered-call option strategy for a stock portfolio is one in which you are giving up some of the stock market's upside potential in return for a higher level of income now.
Many firms are running exchange-traded funds - with varying covered-call strategies used to generate income - while also capturing some of the broad stock market's upside. Goldman Sachs manages two such funds, which reached their one-year anniversaries on Oct. 24. These are the Goldman Sachs Nasdaq-100 Premium Income ETF GPIQ and the Goldman Sachs S&P 500 Premium Income ETF GPIX. Each fund has $2.1 billion in assets under management. Both have performed well against peers since they were launched. Let's focus on GPIX for a uniform comparison of this fund and others that are based on the Nasdaq-100 Index NDX.
Sirion Skulpone, a managing director at Goldman Sachs Asset Management, discussed the firm's approach to covered-call investing during an interview with MarketWatch.
Definitions
Before looking at how covered-call ETFs have performed, we will need to define some terms.
A call option is a contract that allows an investor to buy a security at a set price (called the strike price) until the option expires. A put option is the opposite, allowing the purchaser to sell a security at a specified price until the option expires.
A covered-call option is one that you write when you already own a security.
For example, let's say you own 100 shares of a company and the current share price is $100. You are happy with this investment but would be willing to sell the stock if it were to rise to $110. You can sell an option to another investor that allows them to buy the stock for $110 (the strike price) until the option expires. You will receive a premium for selling the option.
If the stock rises above $110 before the option expires, you will be forced to sell it for $110, no matter how high the share price has risen. If the stock doesn't rise to $110 before the option expires, you keep your premium and can write another option.
In the above example, the $110 call option written when the stock is trading for $100 is known as an "out of the money" option, because the strike price is higher than the current market price. An "in the money option" is one in which the strike price is lower than the current price. If the market price and strike price are equal, the option is "at the money." A lower strike price will command a higher premium. And option premiums tend to be higher when stock prices are more volatile.
Covered-call options generate income, which can also be considered downside protection for a portfolio. In return, the investor gives up any upside above the strike price. That is the trade-off - you are selling some of the upside potential.
Funds that use covered-call options to generate income employ a variety of strategies. A fund manager might hold a portfolio of stocks that they have selected and write covered-call options on a few of them at a time, depending on market conditions and how high the available premiums are. Or a fund might be based on a broad stock-market index and use a covered-call strategy for some or all of its portfolio.
For example, the Global X Nasdaq-100 Covered Call ETF QYLD writes a covered call option for its full index portfolio - the Nasdaq-100 Index - once a month.
The importance of "upside capture"
Since employing a covered-call option means giving up some of your upside potential in the stock market, an obvious concern is the total returns over time. A stock fund employing the strategy can expect its share price to decline along with the broad market during periods of weakness and capture less of the rebound as the stock index recovers.
"When income-seeking investors are looking for income products, they might only look at the headline yield. What is also important is the total return," Skulpone of Goldman Sachs said.
Total returns with dividends reinvested are a reasonable way to compare the performance of funds. In the case of covered-call ETFs, it doesn't really make sense to reinvest. These funds are designed to provide high monthly income, with investors paying a price for the income by giving up some upside. So over long periods, index-based covered-call ETFs can be expected to underperform the underlying indexes. But if their share prices are still rising, they might still be considered good strategies for investors taking the income.
Before discussing actual strategies, let's compare the performance of several ETFs that use covered calls in various ways as they invest in the Nasdaq-100 Index. This index is made up of the largest 100 nonfinancial companies in the Nasdaq Composite Index COMP. It is tracked by the Invesco QQQ ETF Trust QQQ - and we will use QQQ for comparison.
One year can be considered a short period for a long-term investor, but this last year has provided a useful illustration of the action in a bull market with a short-term disruption. Here are the one-year total returns. All fund returns in this article include reinvested dividends (or distributions) and are net of the funds' expenses:
As the Nasdaq-100 rebounded from the 2025 closing low on April 8, GPIQ captured more of the index's upside than the three other covered-call ETFs shown.
For one year through Wednesday, QQQ, which tracks the Nasdaq-100, returned 27.3%. QQQ hit its low for this year on April 8, after the broad market fell during the initial reaction to President Donald Trump's "liberation day" tariff announcements on April 2. All of the covered-call ETFs in the chart recovered along with the index, but to varying degrees, with the Goldman Sachs Nasdaq-100 Premium Income ETF GPIQ in the lead.
Skulpone described a "dynamic options strategy" for GPIQ, which means adjusting the options coverage (the amount of upside potential being sold and the option strike prices) "to deliver our 10.5% goal distribution rate, but do so while capturing as much upside as possible."
When stock-market volatility is low, the managers of GPIQ will sell more of the portfolio's upside to increase option premium income. "When volatility is higher, we can sell less upside for a given level" of option income, she said.
"So we want to cover 20% to 75% of the portfolio's upside, adjusting to volatility. But we leave some of the portfolio fully exposed to the upside of the market," she said. That direct exposure to stocks is what helped GPIQ capture more of the market's rebound after the April 8 bottom than its competitors did.
As we discussed when covering the Invesco QQQ Income Advantage ETF QQA in July, there are different approaches to how funds employ options strategies. This Invesco fund writes covered-call options every day on about 5% of its portfolio. The J.P. Morgan Nasdaq Equity Premium Income ETF JEPQ has 15 equity-linked notes in its portfolio, indicating it is also effectively writing covered calls almost as frequently as QQA.
Skulpone said that Goldman, in its two covered-call ETFs, was writing one-month call options each week. She said she did not think it was necessary for Goldman to write covered calls every day because its direct exposure of up to 75% of the portfolio would enhance its upside capture.
"But in a down market, if you have a strategy covering 100% upside, those strategies will likely outperform ours," she said.
Goldman's strategy has been ideally suited to a bull market, where a strategy of writing covered calls on a full portfolio will hold up better than a broad index in a down market.
Summing up the strategy, Skulpone said: "Our view is for long-term equity investors, equity markets tend to go up over time. Our philosophy is to capture as much upside as possible."
Here is an example of how limited upside capture can lead to price erosion over the long term.
Global X Nasdaq-100 Covered Call ETF QYLD has been making high monthly distributions since it was launched in 2013. But its total return for 10 years through Wednesday was 129.5%, while QQQ's total return was 484.5%, according to LSEG. So a lot of upside was given up in return for QYLD's high monthly distributions.
Distribution yields
Here is a comparison of current quoted distribution yields and expenses for the four covered-call ETFs compared in this article. All four funds pay monthly. These are trailing distribution yields based on the past 12 months' payouts.
Asset Name Launch Date 12-month distribution yield Expense ratio Goldman Sachs Nasdaq-100 Premium Income ETF 10/24/2023 9.64% 0.35% Invesco QQQ Income Advantage ETF 7/17/2024 9.68% 0.29% JPMorgan Nasdaq Equity Premium Income ETF 5/3/2022 11.27% 0.35% Global X Nasdaq100 Covered Call ETF 12/12/2013 13.16% 0.60% Sources: LSEG, fund management firms
An expense ratio of 0.35% means annual fees will total $35 for a $10,000 investment. Goldman Sachs is limiting GPIQ's expenses to 0.29% of the ETF's average assets under management until at least Dec. 29.
MW This income-investing approach from Goldman Sachs has been paying off
By Philip van Doorn
The firm's covered-call ETFs have been outperforming competitors
Covered-call ETFs can provide high monthly income in return for giving up some of the stock market's upside potential.
Investors need to alter their strategies as their objectives change over the years. If you are near the beginning of a multidecade career, a strategy of making regular investments, mainly in stocks, might be your best approach for long-term growth. But if you need to boost your monthly income and still want higher returns than you can get in the bond market, you should at least become familiar with funds that use covered-call strategies.
A covered-call option strategy for a stock portfolio is one in which you are giving up some of the stock market's upside potential in return for a higher level of income now.
Many firms are running exchange-traded funds - with varying covered-call strategies used to generate income - while also capturing some of the broad stock market's upside. Goldman Sachs manages two such funds, which reached their one-year anniversaries on Oct. 24. These are the Goldman Sachs Nasdaq-100 Premium Income ETF GPIQ and the Goldman Sachs S&P 500 Premium Income ETF GPIX. Each fund has $2.1 billion in assets under management. Both have performed well against peers since they were launched. Let's focus on GPIX for a uniform comparison of this fund and others that are based on the Nasdaq-100 Index NDX.
Sirion Skulpone, a managing director at Goldman Sachs Asset Management, discussed the firm's approach to covered-call investing during an interview with MarketWatch.
Definitions
Before looking at how covered-call ETFs have performed, we will need to define some terms.
A call option is a contract that allows an investor to buy a security at a set price (called the strike price) until the option expires. A put option is the opposite, allowing the purchaser to sell a security at a specified price until the option expires.
A covered-call option is one that you write when you already own a security.
For example, let's say you own 100 shares of a company and the current share price is $100. You are happy with this investment but would be willing to sell the stock if it were to rise to $110. You can sell an option to another investor that allows them to buy the stock for $110 (the strike price) until the option expires. You will receive a premium for selling the option.
If the stock rises above $110 before the option expires, you will be forced to sell it for $110, no matter how high the share price has risen. If the stock doesn't rise to $110 before the option expires, you keep your premium and can write another option.
In the above example, the $110 call option written when the stock is trading for $100 is known as an "out of the money" option, because the strike price is higher than the current market price. An "in the money option" is one in which the strike price is lower than the current price. If the market price and strike price are equal, the option is "at the money." A lower strike price will command a higher premium. And option premiums tend to be higher when stock prices are more volatile.
Covered-call options generate income, which can also be considered downside protection for a portfolio. In return, the investor gives up any upside above the strike price. That is the trade-off - you are selling some of the upside potential.
Funds that use covered-call options to generate income employ a variety of strategies. A fund manager might hold a portfolio of stocks that they have selected and write covered-call options on a few of them at a time, depending on market conditions and how high the available premiums are. Or a fund might be based on a broad stock-market index and use a covered-call strategy for some or all of its portfolio.
For example, the Global X Nasdaq-100 Covered Call ETF QYLD writes a covered call option for its full index portfolio - the Nasdaq-100 Index - once a month.
The importance of "upside capture"
Since employing a covered-call option means giving up some of your upside potential in the stock market, an obvious concern is the total returns over time. A stock fund employing the strategy can expect its share price to decline along with the broad market during periods of weakness and capture less of the rebound as the stock index recovers.
"When income-seeking investors are looking for income products, they might only look at the headline yield. What is also important is the total return," Skulpone of Goldman Sachs said.
Total returns with dividends reinvested are a reasonable way to compare the performance of funds. In the case of covered-call ETFs, it doesn't really make sense to reinvest. These funds are designed to provide high monthly income, with investors paying a price for the income by giving up some upside. So over long periods, index-based covered-call ETFs can be expected to underperform the underlying indexes. But if their share prices are still rising, they might still be considered good strategies for investors taking the income.
Before discussing actual strategies, let's compare the performance of several ETFs that use covered calls in various ways as they invest in the Nasdaq-100 Index. This index is made up of the largest 100 nonfinancial companies in the Nasdaq Composite Index COMP. It is tracked by the Invesco QQQ ETF Trust QQQ - and we will use QQQ for comparison.
One year can be considered a short period for a long-term investor, but this last year has provided a useful illustration of the action in a bull market with a short-term disruption. Here are the one-year total returns. All fund returns in this article include reinvested dividends (or distributions) and are net of the funds' expenses:
As the Nasdaq-100 rebounded from the 2025 closing low on April 8, GPIQ captured more of the index's upside than the three other covered-call ETFs shown.
For one year through Wednesday, QQQ, which tracks the Nasdaq-100, returned 27.3%. QQQ hit its low for this year on April 8, after the broad market fell during the initial reaction to President Donald Trump's "liberation day" tariff announcements on April 2. All of the covered-call ETFs in the chart recovered along with the index, but to varying degrees, with the Goldman Sachs Nasdaq-100 Premium Income ETF GPIQ in the lead.
Skulpone described a "dynamic options strategy" for GPIQ, which means adjusting the options coverage (the amount of upside potential being sold and the option strike prices) "to deliver our 10.5% goal distribution rate, but do so while capturing as much upside as possible."
When stock-market volatility is low, the managers of GPIQ will sell more of the portfolio's upside to increase option premium income. "When volatility is higher, we can sell less upside for a given level" of option income, she said.
"So we want to cover 20% to 75% of the portfolio's upside, adjusting to volatility. But we leave some of the portfolio fully exposed to the upside of the market," she said. That direct exposure to stocks is what helped GPIQ capture more of the market's rebound after the April 8 bottom than its competitors did.
As we discussed when covering the Invesco QQQ Income Advantage ETF QQA in July, there are different approaches to how funds employ options strategies. This Invesco fund writes covered-call options every day on about 5% of its portfolio. The J.P. Morgan Nasdaq Equity Premium Income ETF JEPQ has 15 equity-linked notes in its portfolio, indicating it is also effectively writing covered calls almost as frequently as QQA.
Skulpone said that Goldman, in its two covered-call ETFs, was writing one-month call options each week. She said she did not think it was necessary for Goldman to write covered calls every day because its direct exposure of up to 75% of the portfolio would enhance its upside capture.
"But in a down market, if you have a strategy covering 100% upside, those strategies will likely outperform ours," she said.
Goldman's strategy has been ideally suited to a bull market, where a strategy of writing covered calls on a full portfolio will hold up better than a broad index in a down market.
Summing up the strategy, Skulpone said: "Our view is for long-term equity investors, equity markets tend to go up over time. Our philosophy is to capture as much upside as possible."
Here is an example of how limited upside capture can lead to price erosion over the long term.
Global X Nasdaq-100 Covered Call ETF QYLD has been making high monthly distributions since it was launched in 2013. But its total return for 10 years through Wednesday was 129.5%, while QQQ's total return was 484.5%, according to LSEG. So a lot of upside was given up in return for QYLD's high monthly distributions.
Distribution yields
Here is a comparison of current quoted distribution yields and expenses for the four covered-call ETFs compared in this article. All four funds pay monthly. These are trailing distribution yields based on the past 12 months' payouts.
Asset Name Launch Date 12-month distribution yield Expense ratio
Goldman Sachs Nasdaq-100 Premium Income ETF 10/24/2023 9.64% 0.35%
Invesco QQQ Income Advantage ETF 7/17/2024 9.68% 0.29%
JPMorgan Nasdaq Equity Premium Income ETF 5/3/2022 11.27% 0.35%
Global X Nasdaq100 Covered Call ETF 12/12/2013 13.16% 0.60%
Sources: LSEG, fund management firms
An expense ratio of 0.35% means annual fees will total $35 for a $10,000 investment. Goldman Sachs is limiting GPIQ's expenses to 0.29% of the ETF's average assets under management until at least Dec. 29.
(MORE TO FOLLOW) Dow Jones Newswires
November 06, 2025 12:21 ET (17:21 GMT)
MW This income-investing approach from Goldman -2-
One more item for investors in covered-call ETFs to consider is the return of capital. Some income-producing equity funds will return investors' own capital as part of the distribution - or even most of it.
The return of capital can help fund managers reduce the variability of monthly distributions over time. And returning some capital rather than distributing all of a fund's taxable income or capital gains can provide an immediate tax advantage to shareholders. A return of capital also lowers the shareholder's cost basis, making for a larger capital gain (or smaller capital loss) if the investor sells the fund's shares.
"We are actively seeking to make the cash flow to shareholders as tax-efficiently as possible," Skulpone said. She added that Goldman Sachs Asset Management "is one of the largest direct-indexing and tax-harvesting" platforms in the industry for separately managed accounts.
Covered-call ETFs can be appropriate income vehicles for some investors. With differences in strategies and tax consequences, you should do your own research to do as much as possible before selecting a fund, or a group of ETFs, for investment. One way to begin your research is to click on the tickers for more information.
Read: Tomi Kilgore's detailed guide to the information available on the MarketWatch quote page
Don't miss: Six cheap stocks of S&P 500 companies expected to grow quickly through 2027
-Philip van Doorn
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