Roundhill’s XPAY fund avoids covered calls, using FLEX options and return of capital to achieve high distributions with modest underperformance vs SPY.
The Roundhill S&P 500 Target 20 Managed Distribution ETF (XPAY) offers a 20% yield through a strategy using FLEX options and collateral cash, rather than traditional covered calls. The fund’s distributions are largely return of capital, which may defer taxes but could reduce principal over time.
XPAY has trailed the S&P 500 (SPY) only modestly while outperforming many covered call ETFs in total return. Covered call ETFs typically cap upside while retaining downside risk, and their distributions often trigger taxable events as net asset value declines.
Despite these trade-offs, covered call ETFs remain popular among retirees seeking steady income without selling shares. XPAY provides an alternative for investors prioritizing tax efficiency and managed distributions.