Got ,000? This super high yielding dividend ETF could turn it into over ,000 in passive income every year.

Got $10,000? This super high yielding dividend ETF could turn it into over $1,000 in passive income every year.

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  • Covered call strategies are a great way to generate high returns from your portfolio.

  • The JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) combines exposure to the Nasdaq-100 with an options strategy that is currently yielding more than 11%.

  • Even modest initial investment amounts can generate hundreds, if not thousands, of dollars in premium income.

  • 10 Stocks We Like More Than the JPMorgan Nasdaq Equity Premium Income ETF ›

If you were to invest in one S&P 500 exchange traded fund (ETF) today, you would get a return of just 1%. Not too impressive. However, switch to a dividend ETF and you can find a yield in the 3% to 4% range. That’s better, but it still might not provide the income you’re hoping for.

Covered call ETFs are where you can start earning returns of 10% or more. To be clear, there are tradeoffs to owning a covered call ETF versus a simple stock fund. But pure income seekers like them because they can offer high and consistent returns and have a predictable profit structure. If you know what you’re buying, these can be great options.

One of the most popular options in this space is JPMorgan Nasdaq Equity Premium Income ETF (NASDAQ: JEPQ). As the name suggests, this one starts with exposure to the Nasdaq-100 index and writes call options against the securities to generate a high yield. As of November 30, it offers a yield of 11.5%.

Before you go to your brokerage account to load shares, it’s important to know how the fund works and what you’re buying. Once you do, you can understand how even a modest initial investment of $10,000 can generate hundreds of dollars in revenue over the course of a year.

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JEPQ is a bit unusual in that it doesn’t follow the traditional path of buying shares and then writing call options on those shares. Invest in equity-linked notes (ELNs), which are a combination of long equity and short call in one security.

The use of ELNs introduces some risks unique to JEPQ, namely counterparty risk. In simple terms, it means that the bank issuing the note could fail, taking the value of the note with it. For the most part, investors won’t notice any difference in performance or behavior when using ELNs, but there are some structural issues to consider.

These products, despite their complexity, are attracting interest because of their potential for double-digit returns. The option income generated by these strategies is highly correlated with the level of volatility of the underlying security or index. Because the Nasdaq-100 tends to be more volatile, earnings and returns tend to be higher. The ability to pay this monthly income was another selling point.

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