In a world where interest rates have been low for a decade, investors are seeking alternative ways to generate income. One popular choice is option-writing ETFs like the JPMorgan Equity Premium Income ETF (JEPI) and the ProShares S&P 500 High Income ETF (ISPY). Another set of ETFs based on the NASDAQ 100 Index includes the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) and the Goldman Sachs Nasdaq-100 Core Premium Income ETF (GPIQ).
JEPQ, with over $15 billion in assets under management, aims to provide income by selling options and investing in U.S. large-cap growth stocks. It seeks to deliver returns similar to the Nasdaq 100 Index with less volatility and uses equity-linked notes (ELNs) to generate additional income. The top 20 holdings in JEPQ align closely with those of the Invesco QQQ ETF.
On the other hand, GPIQ, with just under $104 million in AUM, sells call options on a varying percentage of the market value of the portfolio to generate income. It aims to provide core equity exposure to the Nasdaq-100 Index with lower volatility potential and attractive yield. Like JEPQ, GPIQ’s sector allocations match well with the QQQ ETF.
Both JEPQ and GPIQ have similar portfolios consisting of the same 100 stocks that make up the Nasdaq 100 Index. While JEPQ uses ELNs for income generation, GPIQ relies on writing call options. GPIQ provides a higher yield and has a slightly lower cost compared to JEPQ. However, both ETFs have lagged behind the benchmark QQQ ETF in terms of performance.
In conclusion, while GPIQ may have a slight edge due to its higher yield and more traditional options-writing strategy, both ETFs may struggle if large U.S. technology stocks experience a downturn. It is essential for investors to diversify their portfolios and consider a mix of asset classes to manage risks effectively.