By Christian Mariani, US Equity Investment Specialist, J.P. Morgan Asset Management
Market swings have prompted some investors to dial back risk and look for solutions that can help buffer their portfolios.
Options income1 exchange-traded funds (ETFs) are one potential approach. These strategies aim to help investors stay invested through choppy markets by combining equity exposure with an income-focused options overlay.
At their core, these ETFs are designed to offer a straightforward proposition: income, some participation in market upside, and potentially less volatility than traditional long-only equity exposure. This can help investors stay invested through different market environments. The premise is simple: rather than trying to time the market, the strategy helps to remain invested while seeking to turn volatility into income and managing its impact.
How do options income ETFs generate income?
Options income ETFs seek to generate consistent distributions by sourcing income from two main streams: stock dividends and options premium. Options premium is often the larger contributor to overall income generation. During volatile periods, these ETFs typically generate more income because options’ prices are positively correlated to volatility. By systematically selling call options to collect options premium, this can, in turn, may translate into higher distributable income for investors at times of higher uncertainty in the equity market.
The table below shows the six most recent month-end observations of the 12-month rolling distribution yield2 for our three Equity Premium Income (EPI) active ETFs, illustrating the trailing distribution profile over time.
| EPI active ETFs
|
12-month rolling distribution yield | |||||
| Feb
2026 |
March 2026 | April
2026 |
May 2026 | June 2026 | July 2026 | |
| JPMorgan Equity Premium Income Complex ETF (JEPI) | 7.06% | 7.08% | 7.08% | 7.00% | 6.77% | 6.76% |
| JPMorgan Nasdaq Equity Premium Income Complex ETF (JPEQ) | 9.46% | 9.45% | 9.35% | 9.20% | 8.98% | 9.12% |
| JPMorgan Global Equity Premium Income Complex ETF (JEGA) | 7.86% | 7.84% | 7.91% | 8.35% | 7.84% | 7.87% |
2. Source: J.P. Morgan Asset Management, data as of 31.07.2026. Yield is not guaranteed. Past performance is not a guide to current and future performance. 12-month Rolling Distribution Yield: The 12-month Rolling Distribution Yield is calculated by aggregating the sum of the distribution yield (non-annualised) for the most recent regularly declared income distributions over the last 12 months as well as any special income distributions in the intervening period. Please refer to offering documents for details on distribution policy.
How do options-income ETFs support portfolios during volatile markets?
In March, the outbreak of US-Iran conflict pushed the CBOE Volatility Index (VIX), a widely used measure of expected US equity market volatility, to levels last seen during the market swings around the ‘Liberation Day’ tariffs in April 2025. Elevated volatility lifted option premiums, which in turn translated into additional income that helped cushion the impact of the broader market dip. This premium income contributed to the outperformance of EPI active ETFs versus their respective benchmarks during the month.
The benefit of premium income can be even more evident in two-way, choppy markets or sideways trading environments. Combined with excess returns from the actively managed portfolios, JEPI, JPEQ and JEGA were able to deliver better total return with lower volatility compared to their respective benchmarks3.
Options premiums and market volatility4
4. Source: J.P. Morgan Asset Management, Bloomberg, and CBOE. Data as of 31.07.2026. Past performance is not a reliable indicator of current and future results. For illustrative purposes only. The graph illustrates the upside opportunity of selling rolling monthly out of the money 30-delta calls.
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Three great ETFs. One great income seeking family.
Lonsec Rating: Highly Recommended5 |
What are the key trade-offs to consider?
The key trade-off is that EPI active ETFs are unlikely to keep pace with the broader market during sharp, narrow equity rallies, as was the case in April and May of this year. This is due to the options overlay strategy, which can limit some potential gains, as well as the typically lower-beta equity portfolio, which is designed to be less sensitive to market moves.
Investors should be comfortable with this trade-off. Rather than aiming to maximise returns, these ETFs seek to balance income generation, participation in equity markets and risk management across a variety of market environments. Option premiums can present a different source of income than stock dividends, or bond income, which can be affected by interest-rate changes.
How do we see the opportunity set?
Markets rarely stay narrow indefinitely, and by their nature change over time. Our equity teams see earnings growth broadening across regions and sectors beyond the largest US technology names. We believe our EPI active ETFs are positioned to participate in market gains while presenting income opportunities.
| How do our options income ETFs work? | ||
| Our EPI active ETFs combine active equity investing with an options-based income approach. They leverage the fundamental research insights of J.P. Morgan Asset Management’s equity platform and provide access to equity portfolios focused on global equities, US equities and technology stocks.
EPI active ETFs aim to help investors stay invested through changing markets by combining diversified equity exposure, active stock selection and an options overlay designed to generate additional income. It is important to keep in mind that income is not assured. |
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Equity exposure presents the foundation |
Dividends are just one source of income. Unlike strategies that rely only on dividend-paying stocks, EPI active ETFs are not required to chase the highest yields to boost payouts. That flexibility allows the portfolios to diversify across their investable universe and actively target higher-quality companies, which may help reduce volatility over time. |
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Options premiums add another income source |
Dividend income is supplemented by an options overlay that seeks to collect premiums by selling index call options linked to the underlying equity portfolios. For distributing share classes, option premiums, along with any dividends from the underlying holdings, are typically paid out monthly. |
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Volatility can support income potential | Regularly collecting option premiums may help EPI active ETFs seek higher and more consistent income than relying on dividends alone. In some market environments, this can also support potential payouts. |
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The trade-offs |
Options may sound complex, but the concept is relatively straightforward: EPI active ETFs sell index call options and collect a premium upfront. In return, they give up some gains above a set level for a set period. In practice, this strategy can help boost income, but it may also limit some potential gains during strong market rallies. |
Provided for information only based on market conditions as of date of publication, not to be construed as offer, research, investment recommendation or advice. Forecasts, projections and other forward-looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.
Diversification does not guarantee investment return and does not eliminate the risk of loss.
1.Call option writing (selling call options) generates income in the form of option premiums. There is a potential to forego some capital appreciation as a result of writing call options. Estimated income is not guaranteed and does not imply positive return.
3. The EPI suite’s building blocks include an underlying equity portfolio and options overlay. The manager seeks to achieve the stated objectives. There can be no guarantee the objectives will be met. The benchmark for JEPI: Standard & Poor’s 500 (Net Return) Index in Australian dollar (AUD), dividends reinvested after deduction of withholding tax. Effective from 1st August 2023, the benchmark is Standard & Poor’s 500 Net Return Index in AUD. The benchmark for JPEQ is NASDAQ-100 Total Return Index in AUD. The benchmark for JEGA is MSCI World Index (Total Return Net).
5. The ratings issued 29/04/2026 for JPMorgan Equity Premium Income Active ETF, JPMorgan US 100Q Equity Premium Income Active ETF and JPMorgan Global Equity Premium Income Complex ETF is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Lonsec receives a fee from fund managers for the reparation of reports. The report / rating is general advice only. An investor should be aware that: a) the advice has been prepared without taking into account an investors’ objectives, financial situation or needs; b) an investor should consider the appropriateness of the advice having regard to their own objectives, financial situation or needs before acting on the advice; and c) an investor should obtain a PDS relating to the product, consider the PDS and seek independent financial advice before making any decision about whether to acquire the product. The rating is not a recommendation to purchase, sell or hold any product. Past performance is not a reliable indicator of future Performance. Ratings are prepared based on information available at the time of preparation and may be subject to change by Lonsec without notice. Visit lonsec.com.au for important documents (FSG, Conflicts Statement). © 2026 Lonsec. All rights reserved.
All investments contain risk and may lose value. This publication is general information only and does not consider your objectives, financial situation, or needs, nor does it constitute personal financial advice. Before investing, obtain and review the Product Disclosure Statement of the Fund and Target Market Determination which have been issued by Perpetual Trust Services Limited, ABN 48 000 142 049, AFSL 236648, as the responsible entity of the fund available on https://am.jpmorgan.com/au to understand the various risks associated with investing in the Fund and in making any investment decision and for more detailed information relating to the risks of the Fund, the type of customer (target market) it has been designed for and any distribution conditions.
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