These 3 ETFs Yield More Than 10% Without Betting Everything on Covered Calls

Alternative Approaches to Covered Calls for Higher Yields

Investors seeking higher yields from their portfolios often turn to covered call ETFs. However, these strategies can come with significant risks, particularly in bull markets where the potential for long-term growth is sacrificed for short-term income. In this article, we will explore three ETFs that offer yields above 10% by taking alternative approaches to generating income.

1. Selling Puts for a Steady Stream of Income

One way to generate a steady stream of attractive premiums is by selling puts. This strategy involves selling a put option to an investor, giving them the right to buy a stock at a predetermined price. In exchange for taking on the obligation to purchase the stock, the seller receives an option premium. If the stock stays above the strike price, the put expires worthless, and the seller keeps the premium. However, if the stock falls below the strike price, the seller can be assigned and required to purchase the stock at the predetermined price, regardless of the current market price. The WisdomTree Equity Premium Income Fund (WTPI) packages this strategy into an ETF, tracking the Volos U.S. Large Cap Target 2.5% PutWrite Index. This index systematically sells slightly out-of-the-money S&P 500 put options, targeting strikes approximately 2.5% below the index, and periodically rolls the positions. As of August 31, WTPI had a 12.09% distribution yield, which annualizes the ETF's most recent monthly distribution relative to its net asset value.

2. High-Yield Bonds for Investors Willing to Take on Credit Risk

Investors willing to take on substantial credit risk can find double-digit yields in the bond market. Near the bottom of the high-yield spectrum are CCC-rated corporate debt issuers, which have historically experienced a 45.67% cumulative default rate over three years. The BondBloxx CCC Rated USD High Yield Corporate Bond ETF (XCCC) provides diversified access to this corner of the bond market, with a 30-day SEC yield of 11.94% as of September 1, 2026. XCCC limits exposure to individual bond issuers to approximately 2%, reducing the damage that any single corporate default can inflict on the portfolio. However, diversification can't eliminate systemic credit risk. If the economy deteriorates, defaults increase, and credit spreads widen, CCC bonds can suffer substantial losses across the board.

3. Business Development Companies (BDCs) for Diversified Income

BDCs are publicly traded investment companies that lend to or invest in private middle-market businesses. These companies are often too small to efficiently access traditional public bond markets, so BDCs step in to provide financing, frequently through floating-rate senior secured loans. Their pass-through structure also makes them natural income vehicles, distributing most of their taxable income to shareholders. The VanEck BDC Income ETF (BIZD) simplifies the process by providing a market-cap-weighted portfolio of publicly traded BDCs. BIZD currently offers an 11.42% trailing 12-month distribution yield, paying quarterly distributions that can fluctuate as the underlying BDCs adjust their own payouts. However, investors should be aware that BIZD reports a 9.69% total expense ratio, with 9.27% consisting of acquired fund fees and expenses generated by the underlying BDC holdings.

Conclusion

While covered call ETFs can provide a modest cushion during bear markets, they may not be the best choice for investors seeking higher yields. By taking alternative approaches to generating income, investors can find ETFs that offer yields above 10%. The WisdomTree Equity Premium Income Fund, the BondBloxx CCC Rated USD High Yield Corporate Bond ETF, and the VanEck BDC Income ETF are three options worth considering. However, investors should be aware of the risks associated with each strategy and carefully evaluate their own risk tolerance before making an investment decision.

What to Watch Next

As the economy continues to evolve, investors will need to stay vigilant and adapt their strategies to changing market conditions. The performance of these ETFs will be closely watched, and investors should be prepared to adjust their portfolios accordingly. Additionally, the development of new income-generating strategies and the evolution of existing ones will be worth monitoring. By staying informed and adaptable, investors can make the most of the opportunities available in the market.