SPYI inflows are rising: Is it a good covered call ETF to buy?

By:
on Aug 7, 2023
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  • The NEOS S&P 500 High Income ETF is a new actively managed ETF.
  • Inflows have jumped sharply in the past two straight months.
  • It is a risky but worthwhile fund to add into a portfolio.

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American stocks are doing well this year, with the Dow Jones, S&P 500, and the Nasdaq 100 indices rising by double-digits. At the same time, demand for covered call ETFs has jumped, as evidenced by the strong performance of key funds like JEPI, JEPQ, and TSLY. A new fund, known as the NEOS S&P 500 High Income ETF (SPYI), is gaining traction.

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What is the NEOS S&P 500 High Income ETF?

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The NEOS S&P 500 High Income ETF is a small but fast-growing fund that has grown popular among investors. They love it thanks to its high dividend yield of about 12.10% and the fact that payments are made on a monthly basis. The 12.10% yield is attractive since America’s bonds are yielding at less than 6%.

NEOS S&P 500 High Income ETF was started in August last year and has grown its assets to over $218 million. Most of these assets flowed to the fund this year as the fund added $101 million in June and $84 million in July.

The SPYI ETF is an actively managed fund that takes advantage of tax loss harvesting opportunities while using a data-driven call option strategy. By being actively managed, SPYI ETF is different from JEPI, which is passively managed.

Its approach is fairly simple in that it allocates funds in at least two components. First, it invests in written call options on the S&P 500 index. 

Second, it uses a portion of the premium received to buy out-of-the money call options on the index. The latter trade provides upside equity participation when the S&P 500 index rises.

Therefore, the like S&P 500 index, the biggest companies in the fund are tech firms like Apple, Microsoft, Amazon, Nvidia, and Tesla among others.

SPYI has underperformed the SPY ETF in the ongoing bull market. This is in line with how other covered call funds perform in such periods. Still, I believe that it is a good fund to buy alongside other funds like the SPDR S&P 500 fund and Vanguard S&P 500 fund.

SPYI ETF technical analysis

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SPYI ETF

The daily chart shows that the SPYI ETF has been in a strong bullish trend in the past few months. This rally happened as American equities rebounded. It is being supported by the 25-day and 50-day moving averages. It has also formed an ascending channel shown in green and is at its lower side. 

Therefore, the shares will likely resume the bullish trend as buyers attempt to retest the upper side of the channel at about $51. In the longer term, the fund will likely jump to $55.

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