NEOS Russell 2000 High Income ETF

IWMI

Market cap $647M

On this episode of the “ETF of the Week” podcast, VettaFi's Head of Research Todd Rosenbluth discussed the NEOS Russell 2000 High Income ETF (IWMI) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF.

VettaFi's Head of Research Todd Rosenbluth discussed the NEOS Russell 2000 High Income ETF (IWMI) on this week's “ETF of the Week” podcast with Chuck Jaffe of “Money Life.” For more news, information, and analysis visit the Tax Efficient Income Content Hub.

Volatility and dispersion are the likely key themes for 2026. The sky-high valuations and increasingly shaky economic/financial fundamentals support that view. At the same time, the market's "put mechanism," which has made the buy-the-dip strategy work since really the GFC, has not disappeared.

One month into 2026, one of the most widely discussed trends is the impressive rebound of domestic small-cap stocks. Sure, the upside delivered to start the year by ETFs tracking the Russell 2000 and S&P SmallCap 600 indexes, among others, is worth taking with a grain of salt.

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.

IWMI tracks the Russell 2000 and writes covered calls on a portion of its holdings. It sports a massive 13.5% distribution yield. Upside potential is significantly reduced, although not zero. The fund has performed well since inception, with double-digit CAGR.

IWMI offers a ~14% yield by combining small-cap exposure with a tax-efficient out-of-the-money covered call strategy. IWMI has recently outperformed both the Nasdaq-100 and AI-focused covered call ETFs, benefiting from the great rotation. In the article, I flesh out three key structural tailwinds that should support small-cap and IWMI outperformance going forward.

The NEOS Russell 2000 High Income ETF is upgraded to Buy, offering a 14% yield and strong capital preservation versus higher-yielding peers. The fund's OTM option writing strategy allows some upside but caps growth, making IWMI best suited for income-focused, long-term investors. IWMI outperforms synthetic high-yield peers in total return, avoiding severe price erosion seen in RDTY and RDTE.

The NEOS Russell 2000 High Income ETF offers high monthly income via a covered call strategy on the Russell 2000 index. IWMI currently yields a 14% distribution rate, with approximately 95% of payouts classified as return of capital, offering tax advantages for many investors. The ETF provides diversification away from tech-heavy large caps, with sector exposure favoring finance and healthcare, and benefits from recent small-cap outperformance.

I construct covered call ETF portfolios using a three-bucket approach: safe, moderate, and ultra-high yield for balanced income and risk. Portfolio weightings target 50% in 10–25% yield ETFs, 30% in 25–50% yield, and 20% in 50%+ yield, with regular rebalancing. Proxies like IWMI (safe), BLOX (moderate), and MSTY (ultra-high yield) illustrate how to allocate and manage risk across buckets.