NEOS Russell 2000 High Income ETF

IWMI

Market cap $740M

Covered call ETFs offer attractive monthly yields, often exceeding 10%, appealing to income-focused investors. Most top covered call ETFs are heavily concentrated in large-cap growth, specifically S&P 500 and Nasdaq-100 exposures. This concentration introduces significant risk, as these ETFs exhibit strong performance correlations and similar downside profiles.

NEOS Investments' high-income ETFs deliver monthly distributions with tax efficiency, leveraging section 1256 options for enhanced yields and lower tax burdens. QQQI, SPYI, and other NEOS equity funds offer yields up to 14.6%, with most distributions classified as return of capital, supporting both income and portfolio diversification. Recent NEOS launches in alternatives—BTCI, NEHI, IAUI, MLPI—expand high-yield, tax-advantaged opportunities, though volatility and distribution variability warrant careful allocation.

NEOS Russell 2000 High Income ETF shifts to Hold as small cap risks rise and upside catalysts wane. IWMI's structure prioritizes upside capture over premium income, making it less effective if small caps stay rangebound or correct. Current option coverage is only 50-60% of holdings, limiting income generation and closely tying returns to Russell 2000 performance.

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.