ProShares S&P 500 High Income ETF

ISPY

Market cap $990M

For the past decade, exchange trade funds (ETF) that track major stock exchanges have done very well serving as wealth building platforms for millions of investors.

Investors looking to generate income from their portfolio have myriad investment choices, ranging from simple, like buying dividend stocks, to more complex, like using options. If you don't like to complicate your life, you probably won't want to delve into options.

ProShares S&P 500 High Income ETF offers a daily covered call strategy, providing potential for greater upside capture than peers with monthly covered calls. ISPY's lower expense ratio (0.55%) and monthly distributions make it an attractive option for income-focused investors seeking diversification in their portfolios. Compared to XYLD and SPYI, ISPY demonstrates more upside participation than XYLD but less nimbleness than actively managed SPYI, with a current yield near 10.4%.

ETFs with a covered call yield boost component have become popular in recent years.

I am upgrading ISPY to a buy, as it has proven resilient and effective in generating high, tax-efficient income with capital preservation. ISPY writes calls on the S&P 500 index, not individual holdings, making it cost-efficient and allowing for some price growth alongside high monthly distributions. While ISPY underperforms pure S&P 500 ETFs and some higher-yielding option funds in total return, it offers better capital stability and less price decay.

The VIX spiked above 60 during early-April tariff turmoil, creating an ideal time for selling premium and buying S&P 500 call options for risk-seeking investors. Despite high volatility, ISPY underperformed SPY due to a strong rally post-April 7 market low, losing more than four points in alpha since then. ISPY, with a high 11.7% trailing 12-month yield from daily call options, is recommended as a buy, anticipating equity market consolidation and benefiting from covered call strategies.

Consider diversifying your current portfolio with higher-yielding exchange-traded funds (ETFs).

Selling 0 days-to-expiry (0DTE) covered calls offers high income and upside potential with less downside protection compared to monthly covered call funds. TSPY's active management approach generated consistent distributions yielding 14% while outperforming both ISPY and the S&P 500 in total returns. ISPY's passive, formulaic strategy provides predictable returns but suffers from volatile distributions, making TSPY a potential superior alternative if performance continues.

A potentially fruitful stock options strategy known as writing covered calls can be performed on stocks you own to collect additional income during every options expiration period. It can be lucrative to compound the gains.

I rate ISPY as a Strong Buy due to anticipated 2025 volatility, which will increase option premiums and dividend distributions for income investors. The S&P 500 appears overvalued, with growth driven by mega large-caps like Nvidia struggling to meet lofty expectations, suggesting limited room for further growth. Trump's unpredictable policies and fewer Fed rate cuts are expected to elevate market volatility, benefiting funds like ISPY that capitalize on such conditions.