NEOS ETFs leverage Section 1256 options contracts to reduce taxable ordinary income on high distributions.
Three exchange-traded funds from NEOS deliver trailing-twelve-month yields of 11% to 13% while minimizing ordinary income tax liabilities. The NEOS Russell 2000 High Income ETF (IWMI), NEOS Real Estate High Income ETF (IYRI), and NEOS Enhanced Income 1-3 Month T-Bill ETF (CSHI) use options overlays to boost payouts above traditional asset-class yields.
The funds employ Section 1256 options contracts, which automatically apply a 60/40 split between long-term and short-term capital gains, avoiding higher ordinary income tax rates. CSHI, for example, combines S&P 500 put-spread premiums with a T-bill ladder to achieve a 4%+ yield and near-zero beta.
Investors frustrated by tax inefficiencies in conventional high-yield products have driven demand for these strategies, which prioritize after-tax returns alongside distribution size.