What is a covered call ETF?

Covered call ETFs typically own a basket of stocks (often an index) and sell call options against that portfolio. The option premiums can boost income, which is why these funds often show higher distribution rates.

The trade-off is upside limitation. In strong bull markets, covered call strategies often lag because the sold calls cap some gains. In choppy or flat markets, they can look more attractive.

If you're considering a covered call ETF, focus on total return and the strategy details: which calls are sold (how far out-of-the-money), how often they roll, fees, and tax treatment of distributions. The headline yield alone can be misleading.