How This Covered Call ETF List Can Power a Second Engine of Wealth
- Jul 17
- 8 min read
Updated: Aug 5
Most traders enter the markets with one goal in mind: growth. And that makes sense. The right growth-focused system - one that uses cycle timing, price structure, and crossover averages - can deliver powerful returns when applied with discipline. At Market Turning Points, we’ve built our core approach around that idea, using leveraged ETFs only during the strongest parts of the market cycle and stepping aside during weaker periods. It’s a system designed for growth, not noise.
But long-term wealth isn’t just about picking the right moments to enter and exit trades. Growth is only one engine. The second engine? Income.
Dividend-paying ETFs, especially those employing covered call strategies, offer a way to generate cash flow even during market stagnation. And when reinvested correctly, that income can multiply your compounding power over time. This article walks through a carefully selected covered call ETF list and explores how pairing these instruments with a cycle-based strategy can fuel wealth in two directions.
Why Covered Call ETFs Work as a Secondary Strategy
Covered call ETFs generate income by selling call options on underlying assets. This creates cash flow from option premiums in addition to any dividends. While this income can fluctuate based on market conditions, volatility, and option pricing, some funds are currently yielding anywhere from 6 percent to over 40 percent annually.
Unlike traditional growth strategies, the appeal of covered call ETFs lies not in price appreciation but in reliable cash flow. That income can be reinvested during pullbacks, adding to your position when prices are discounted. Over time, this reinvestment during market weakness becomes a compounding engine of its own.
Of course, high yields are often accompanied by increased risk and volatility. But when these vehicles are used in the right accounts - like IRAs or other long-term portfolios - they can become a powerful complement to your more active trading system.
Covered Call ETF List for Strategic Investors
Here are several ETFs that are currently delivering significant income through covered call strategies. These are not recommendations, but examples of what a strategic income engine could include:
BITO (ProShares Bitcoin Strategy ETF): Tracks Bitcoin futures and applies a covered call overlay. Recent trailing yield: over 48 percent.
GDXY (YieldMax Gold Miners Option Income Strategy ETF): Offers exposure to gold miners with option-generated income. Yield range: 36 to 45 percent.
JEPI (JPMorgan Equity Premium Income ETF): Lower volatility option overlay on blue-chip equities. Yield: around 8 to 10 percent.
TLTW (iShares 20+ Year Treasury Bond BuyWrite Strategy ETF): Uses covered calls on long-duration bonds. Yield: varies, but often around 8 to 9 percent.
These ETFs serve different functions depending on your appetite for volatility. BITO and GDXY are aggressive, while JEPI and TLTW offer a more balanced risk-income profile.
Adding them to your long-term plan allows you to use income not just for withdrawals, but as dry powder during market dips - a principle that aligns perfectly with buying during weakness and selling into strength.
Compounding Power: Income Plus Cycle-Based Reentry
Let’s consider a simple example. Imagine you’re 40 years old with $100,000 allocated into high-yield ETFs like BITO or GDXY. If those yields were reinvested annually, even at a reduced average of 30 percent, that capital could potentially grow into several million by retirement.
Of course, yields like that are not guaranteed and could decline with changing volatility or market conditions. But even a few strong years of reinvestment can accelerate compounding. The key is not just holding these ETFs, but using their income output strategically - adding to positions during periods of structural weakness when prices are favorable.
It’s during those weak cycles that structure matters most. A trader using cycle timing can reallocate income into positions when everyone else is fearful, maximizing long-term compounding. Check our post on Swing Trading Examples Using Cycle Timing and Price Structure for more info.
Retirement Income: Covered Call ETF List for Steady Cash Flow
What if you’re closer to retirement?
Let’s say you’re 60 with $100,000. Conservative ETFs might yield 4 percent, giving you around $333 per month. Mid-range ETFs like JEPI or TLTW can offer up to $1,500 per month. At the high end, BITO or GDXY could deliver over $3,000 per month - though with higher risk and potential volatility.
This range allows retirees to choose income based on their comfort level. But even a moderate yield, if reinvested during strong years, adds real value. And when withdrawals begin, the income stream continues to support the portfolio.
Investors at or near retirement benefit most when they remain strategic. Timing still matters. Entering during periods of structural support, or using cash reserves to buy during weakness, can improve both income stability and capital preservation.
Ultimately, the compounding effect of reinvested income - paired with cycle awareness - can help retirees balance growth and safety in uncertain markets. Check our post on Master the 4 Stages of Stock Cycle to Avoid False Market Bottoms for more info.
How to Use This Strategy Effectively
Covered call ETFs are best used in coordination with a system that identifies when markets are favorable or weak. That way, income is redeployed strategically. Here are some principles to follow:
Don’t guess market bottoms. Wait for clear structural signals.
Use income as capital during pullbacks - not just for lifestyle withdrawals.
Allocate risk based on volatility tolerance and account goals.
Reassess periodically, as yields and market conditions shift.
Ultimately, the goal is to let income work for you - not just passively, but actively, with timing that aligns to market structure. Check our post on The Truth About Stock Market Seasonality: Structure Leads, News Follows for more info.
People Also Ask About Covered Call ETFs
What is a covered call ETF?
A covered call ETF is an exchange-traded fund that uses a covered call strategy to generate income. This means the fund holds a portfolio of underlying assets - typically stocks or futures—and sells call options on those assets to collect premiums.
The income generated through this method can be paid out to investors in the form of monthly dividends. These premiums are typically more consistent than capital gains, making the ETF appealing to income-focused investors. While this approach limits upside potential, it helps produce a steady cash stream.
Investors should understand that a covered call ETF is not a growth tool. It is best suited for those seeking cash flow or looking to complement a broader strategy based on timing and structure.
Are covered call ETFs good for long-term investing?
Covered call ETFs can play a role in a long-term strategy - especially when the goal includes income and reinvestment rather than just capital appreciation. While they may not outperform broad market indices in strong bull markets, they provide a steady income stream during periods of sideways movement or mild pullbacks.
If income from these ETFs is reinvested during weak cycles, the compounding effect can support portfolio growth over time. This is especially useful for accounts where consistent returns matter more than chasing highs.
However, investors need to be mindful of when and how they deploy capital into these funds. Understanding market structure and timing reentries during pullbacks improves the effectiveness of the strategy.
Do covered call ETFs reduce risk?
Covered call ETFs can help reduce some downside risk by providing a cushion in the form of premium income. That said, they are not risk-free. The underlying assets still fluctuate with the broader market, and income can drop in periods of low volatility.
Because they cap upside potential, these ETFs may underperform during strong rallies. But during choppy or sideways markets, they may outperform traditional ETFs because of their income component.
The risk-reducing benefit is most useful when combined with cycle awareness, so the investor knows when to scale in or out based on market conditions.
How often do covered call ETFs pay dividends?
Most covered call ETFs pay dividends monthly. These distributions come primarily from the premiums collected through selling call options, and in some cases, from traditional dividends on the underlying assets.
Monthly payouts make them attractive for retirees or income-focused investors who want predictable cash flow. However, the amount can vary each month depending on option activity and market volatility.
The regular cadence of monthly income also makes these ETFs ideal for reinvestment strategies. When used during market pullbacks, that reinvested capital can enhance long-term compounding.
What are the downsides of covered call ETFs?
The primary downside of covered call ETFs is the limited upside potential. By selling call options, the fund agrees to cap gains on the underlying asset in exchange for the option premium. This means that in strong bull markets, these funds may significantly underperform.
They are also exposed to declines in the underlying asset, so there is still downside risk despite the income buffer. And during low-volatility periods, the premiums collected can shrink, reducing the income stream.
Investors should not view covered call ETFs as a substitute for growth-focused strategies. They are best used as a complementary piece within a broader cycle-timed approach.
Resolution to the Problem
Many investors build their wealth strategies solely around capital gains. While that can work during bull markets, it leaves portfolios exposed during stagnation or drawdowns. Relying on appreciation alone creates unnecessary risk, especially when market cycles turn against you.
This is where covered call ETFs offer real value. Their income-focused structure provides consistent cash flow that can continue even when markets move sideways. And when that income is reinvested with timing - particularly during cyclical lows - it becomes a compounding mechanism.
Used alongside a disciplined growth strategy, these ETFs add balance and flexibility. You’re no longer dependent on price movement alone. Your capital is working in two ways: growing when cycles are strong, and producing income to expand positions when markets pull back.
Ultimately, that’s what a second engine of wealth looks like. A system where structure guides your timing, and income gives you the fuel to accelerate compounding when others are stepping back.
Join Market Turning Points
If you want to go beyond surface-level strategies and start applying structure, timing, and disciplined reinvestment in your portfolio, Market Turning Points is here to help. Our members get real-time alerts, chart-based structure updates, and actionable guidance on when to move in or sit out.
You’ll also learn how to combine active trading with passive income strategies like covered call ETFs, building a portfolio that performs across cycles. Whether you’re still growing capital or already focused on income, we show you how to make each part work together.
Our approach isn’t about prediction. It’s about reading structure and acting with clarity. That’s how you stay aligned with the market - and ahead of it.
Conclusion
A covered call ETF list is not just a passive reference - it’s a strategic tool when used with intention. These instruments can provide income when markets stall and create opportunity when reinvested during pullbacks. They don’t replace a cycle-based strategy; they enhance it.
When your portfolio includes both growth-focused positions and income-driven components, you create balance. You have something to build with during rallies, and something to reinvest when prices dip.
This combination - active cycle timing and income reinvestment - is what truly compounds wealth. It’s not speculation. It’s structure. And it works best when applied with consistency.
You don’t need to chase every headline or trend. You need to trust your system, reinvest with purpose, and let both engines of your portfolio work in sync.
Author, Steve Swanson