Investors in zero-day-to-expiration covered call ETFs should anticipate low-20% returns due to VIX levels and market rally constraints.
The Roundhill S&P 500 0DTE Covered Call Strategy ETF (XDTE) advertises a 32.5% yield, but analysts warn this figure overstates sustainable returns. With the VIX near 16, realistic expectations for XDTE and similar funds like QDTE settle in the low 20% range.
Over the past year, XDTE matched the S&P 500’s 21% total return, yet its covered call structure caps upside during strong market rallies. The fund sells daily out-of-the-money calls on the S&P 500, collecting premiums that expire the same day, a strategy repeated roughly 250 times annually.
Other funds, including QDTE, RDTE, and JEPY, employ similar 0DTE strategies on different indices, aiming to generate consistent income. However, the durability of these yields remains uncertain as market conditions evolve.