Troy Cates, Co-Founder, Managing Partner, and Portfolio Manager at NEOS, joined Keith Black, Managing Director at RIA Channel, to discuss options-based ETF income strategies. As interest rates decline, Cates predicts that investors will search for income outside of the fixed-income space.
NEOS’ recent webcast, Higher Income Options During Times of Declining Interest Rates, is now available on demand. The webcast reviews the strategies for the NEOS S&P 500 High Income ETF (SPYI), the NEOS Nasdaq-100® High Income ETF (QQQI), and introduces the newest ETF, the Russell-2000® High Income ETF (IWMI).
NEOS manages its ETFs in a tax-efficient manner, using index options to qualify for returns that are taxed 60% as long-term capital gains and 40% as short-term capital gains. Income generated from ETFs that sell options on single stocks or individual ETFs is taxed as ordinary income or short-term capital gains. The same treatment also exists for other derivative instruments, such as equity-linked notes or swap agreements.
In addition to utilizing index options, the NEOS portfolio management team aims to harvest losses within their portfolios when applicable, in order to classify a portion of their monthly distributions as a return of capital, which is not taxable in the year it is received.
High income generation and tax efficiency are core pillars for NEOS and the team enjoys spending time with clients and explaining these strategies to interested advisors.
Resources:
WEBCAST NOW ON DEMAND – Higher Income Options During Times of Declining Interest Rates