In 2022, the JPMorgan Equity Premium Income ETF (AMEX:JEPI) was the toast of the financial markets. As the S&P 500 (AMEX:SPY) and the Nasdaq 100 soared to new heights, covered-call funds like JEPI gained popularity among income-seeking investors. Covered-call funds have recently come back into the spotlight, with investors pouring over $26 billion into the now-$65-billion derivative income industry.
JEPI is one of the best-run covered-call ETFs, designed to provide a 6.5% monthly yield, 8% returns, and 35% lower volatility compared to traditional equity investments. This makes it an attractive option for income investors looking for steady returns with reduced risk. However, despite its strong performance, JEPI and its peer group of covered-call ETFs are starting to show signs of being overrated by investors.
While JEPI offers a high yield and lower volatility, it is not without its drawbacks. Investor interest in covered-call ETFs like JEPI is beginning to stagnate, signaling potential concerns about the sustainability of their high yields. It is essential for investors to consider the risk and limitations of these types of funds before allocating a significant portion of their portfolio to them.