NEOS Gold High Income ETF

IAUI

Market cap $358M

NEOS Gold High Income ETF earns a Buy rating for its strong drawdown mitigation and income generation, especially in flat or volatile gold markets. IAUI's dynamic, actively managed covered call strategy leverages synthetic gold exposure, freeing cash for money markets and treasuries to enhance returns. The current portfolio structure uses partial, laddered call coverage, balancing upside participation with premium income and risk management.

The market seems to be increasingly punctuated by notable volatility spikes, while the broad indices (and AI names) struggle to justify their valuations. This is the necessary setup for covered call ETFs to come in and shine. However, there is a huge caveat (not that visible risk), which, if not properly considered, might lead covered call investors to be disappointed.

NEOS Gold High Income ETF offers a 12.5% estimated annual yield via a covered call strategy on gold-focused assets. IAUI has delivered a 32.1% total return since inception, but underperforms traditional gold ETFs like GLD and AAAU in strong rallies due to capped upside. The fund's distributions are tax-efficient, with 90% classified as return of capital YTD, appealing to investors seeking minimized tax liability.

Following a year in which gold notched more than 50 record highs, some investors may be apprehensive about how much bullishness the yellow metal has left in its 2026. Fortunately, the prevailing wisdom among banks and other professional market participants is that gold is in for another impressive showing in 2026.

Covered call ETFs play an increasingly more important role for income investors and their cash flows. These products come with several risks, but most of them should be acceptable for those who seek sustainable income. Yet, the key risk is an L-shaped sell-off, which might lead to a serious impairment of both NAV and current income.

2026 has started with global geopolitical and economic turmoil, yet major indices like QQQ and SPY continue their relentless bull run. Valuations in AI/tech names such as Palantir, Microsoft, and Meta Platforms appear stretched, raising concerns about potential downside risk. Key risks include a weaker dollar, higher inflation, and a sudden AI bubble burst, all threatening current “risk-on” market sentiment.

NEOS Gold High Income ETF (IAUI) offers exposure to gold and U.S. government debt, enhanced by a covered call strategy for high income. IAUI delivered a 15.5% total return since inception, outperforming long bonds but underperforming gold due to capped upside from options. I rate IAUI a buy, favoring its income generation in a rangebound-to-bullish gold environment, with a 6.87% yield and tactical covered calls.

Last year brought another record-setting avalanche of new ETF launches. Some of those rookie ETFs got off to impressive starts while the jury is still out on others.

We are entering 2026 with record highs and a 3-year bull-run. Investing in 10%+ yielding securities might not be the smartest idea against this kind of backdrop, when, theoretically, we should be considering a risk-off move. However, there are safe and high-yielding exceptions to be found.

Covered call ETFs promise high income and outperformance in sideways or declining markets, but face opportunity cost in bull markets. Despite strong AuM growth and new launches like NEOS MLP & Energy Infrastructure High Income ETF (MLPI), Covered Call ETFs are structurally suboptimal with inherent negative alpha. Covered call ETFs consistently underperform not only in rising markets due to capped upside, but also during market declines.