Covered call ETFs: Generating extra income from market ups and downs

Investors are always looking for ways to generate income while managing risk, especially during volatile market conditions. Covered call ETFs offer a unique approach by providing steady income through option premiums while maintaining exposure to stocks.

These ETFs use a strategy called the covered call writing technique, where they sell call options on their holdings to collect option premiums. This strategy allows investors to earn additional income even if the market is flat or slightly declining. While it limits upside potential, it provides a more stable return profile, making it attractive for income-focused investors.

This article explores what covered call ETFs are, how they work, their benefits, risks, and who should consider them as part of their investment strategy.