QQQI: High Yield, High Fees—Is It a Sustainable Income Play?

The NEOS Nasdaq-100 High Income ETF (QQQI) has emerged as a standout in the crowded options-based ETF space, offering a 15% yield as of June 2025. For income-focused investors, this is a tantalizing figure, especially in a low-yield environment. But the question remains: does this high yield justify the fund's 0.68% expense ratio and its capped upside potential compared to alternatives like the Global X NASDAQ 100 Covered Call ETF (QYLD, 0.60% expense ratio) and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ, 0.35% expense ratio)? To assess the sustainability of QQQI as an income play, we must dissect its cost structure, yield generation, and structural trade-offs.

The Cost of High Yield: QQQI's 0.68% Expense Ratio in Context

QQQI's expense ratio of 0.68% is 0.07% higher than QYLD and 0.33% higher than JEPQ. While these differences may seem small, they compound significantly over time. For example, a $10,000 investment in QQQI would incur $68 in annual fees, whereas the same amount in JEPQ would cost $35. Over a decade, these fees could erode a meaningful portion of returns, particularly in a market where capital appreciation is limited.

However, QQQI's higher fees are justified by its active management and tax-efficient strategies. The fund employs a data-driven call spread strategy, writing both sold and purchased Nasdaq-100 index options to generate income while allowing partial participation in market gains. This approach is more nuanced than QYLD's systematic sale of at-the-money (ATM) options, which fully caps upside potential. QQQI also leverages tax-loss harvesting and Section 1256 contracts, which are taxed at a favorable 60/40 long-term/short-term rate. These features enhance after-tax returns, potentially offsetting the higher expense ratio for investors in higher tax brackets.

Yield Sustainability: Can QQQI Maintain 15%?

QQQI's 15% yield is among the highest in its category, but sustainability hinges on market conditions and the continued effectiveness of its options strategy. The fund's performance as of June 2025—16.43% annualized returns over one year and 18.64% since inception—suggests strong execution. However, this yield is heavily dependent on the volatility of the Nasdaq-100, which is dominated by tech stocks. In a low-volatility environment, the premium income from options may decline, forcing the fund to reduce distributions.

In contrast, QYLD's 13.41% yield is more consistent due to its systematic ATM call strategy, which generates stable premiums but limits growth. JEPQ's 11.33% yield is lower but paired with a more flexible approach, selling out-of-the-money (OTM) calls on a subset of the index and using equity-linked notes (ELNs) to reduce drag on upside potential. JEPQ's active management allows it to adjust strike prices and expiration dates based on market conditions, potentially preserving yield during periods of volatility.

Upside Potential: The Trade-Off Between Income and Growth

QQQI's call spread strategy allows it to retain some upside in rising markets, unlike QYLD, which forfeits gains entirely once the Nasdaq-100 exceeds the strike price of its sold options. However, QQQI's upside is still capped, as it only participates in a portion of the index's gains. This trade-off is critical for long-term investors: while QQQI's strategy balances income and growth, it may underperform in a bullish market compared to a direct Nasdaq-100 play like Invesco QQQ (QQQ).

JEPQ's approach strikes a better balance. By selling OTM calls, it retains more upside potential while still generating income. Its 2023 performance (35.19% return vs. QYLD's 22.75%) underscores the advantages of this strategy in a strong market. For investors prioritizing long-term growth alongside income, JEPQ's lower fees and flexible strategy may offer a more sustainable path.

Long-Term Viability: Aligning With Investor Goals

The viability of QQQI as a long-term income play depends on the investor's priorities. For those seeking tax-efficient monthly distributions and willing to accept a higher expense ratio for the potential of partial upside participation, QQQI's structure is compelling. Its 13.92% distribution rate (as of April 2025) and tax-loss harvesting capabilities make it a strong candidate for portfolios focused on income generation.

However, for investors prioritizing cost efficiency and total returns, JEPQ's 0.35% expense ratio and active management model may be more attractive. QYLD, while offering the highest yield, is best suited for investors who are comfortable with capped upside and are primarily focused on income.

Conclusion: A Nuanced Choice for Income Investors

QQQI's 15% yield is undeniably alluring, but its 0.68% expense ratio and capped upside potential require careful consideration. While the fund's tax-efficient strategies and call spread approach offer advantages over QYLD and JEPQ, the higher fees may not be justified for all investors.

For those who value tax efficiency and are willing to pay a modest premium for partial upside participation, QQQI is a strong contender. However, investors seeking lower costs and greater flexibility should evaluate JEPQ, while QYLD remains a viable option for those prioritizing consistent income at the expense of growth. Ultimately, the choice depends on aligning the fund's structure with the investor's long-term objectives—whether it's steady income, capital appreciation, or a balance of both.

In a market where volatility and tax efficiency are key, QQQI's innovative strategy positions it as a unique player. But as with any high-yield vehicle, investors must weigh the benefits of income against the costs and constraints of its structure.