Investors looking to generate income while benefiting from the upside potential of the Nasdaq-100 can consider the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ). The Nasdaq-100 index has historically outperformed the S&P 500, with an annualized total return of 17.8% over the last decade compared to the S&P 500’s 10.8%. While the index is tech-heavy and tends to be more volatile, the JEPQ ETF offers a unique opportunity to capitalize on this volatility and potential growth.
The ETF utilizes a dual strategy to achieve its goal of providing monthly distributable income and equity exposure to the Nasdaq-100 with less volatility. The fund’s managers use data science and fundamental research to build an optimal portfolio of Nasdaq-100 stocks, while also employing an options overlay strategy by writing call options on the index to generate income.
This approach has proved successful, with the fund outperforming the Nasdaq-100 in certain periods due to its strategic stock allocations. The options overlay strategy has also been lucrative, with the fund’s last income payment yielding nearly 9.6%. Over the past year, the fund has generated over a 10% income yield, providing investors with a reliable source of passive income.
Compared to traditional Nasdaq-100 ETFs like the Invesco QQQ Trust, the JEPQ ETF offers a more balanced approach by combining income generation with equity exposure. While the Invesco QQQ Trust focuses on uncapped equity upside exposure, it offers limited income potential and higher volatility. In contrast, the JEPQ ETF aims to address these issues by optimizing its stock allocations and utilizing options to generate income, making it a more suitable option for investors seeking income and lower volatility.
Overall, the JPMorgan Nasdaq Equity Premium Income ETF presents a potentially better way to invest in the Nasdaq-100, providing investors with a reliable income stream while also capturing the upside potential of the index. By combining income generation with equity exposure, the fund offers a unique opportunity for investors looking to diversify their portfolio and generate passive income.