QRMI: Balancing Yield and Risk in Volatile Markets Through Collar Strategy

The Nasdaq 100 Risk Managed Income ETF (QRMI) has emerged as a compelling option for income-seeking investors navigating volatile markets, offering a blend of high yield and structured risk mitigation. By employing a protective net-credit collar strategy, QRMI aims to generate consistent monthly distributions while shielding investors from sharp market declines. This article examines QRMI's yield sustainability and its approach to risk management, assessing its viability in today's uncertain environment.

The Collar Strategy: How QRMI Generates Income and Mitigates Risk

QRMI's core mechanism involves two components:
1. Long 5% out-of-the-money put options on the Nasdaq 100 Index (NDX), which protect against downside risk by capping losses if the index falls.
2. Sold at-the-money call options, which generate premium income but limit upside participation in rising markets.

This net-credit structure ensures QRMI retains the premium from sold calls while purchasing puts to buffer against declines. The result is a steady income stream—QRMI has paid monthly dividends since its 2021 inception—with a trailing 12-month yield of 12.8% as of June 2025, significantly outpacing the average of top dividend payers in the U.S. Financial Services sector (7.66%).

Distribution History: Stability Amid Volatility

QRMI's monthly distributions in 2025 reflect both consistency and adaptability. Recent payouts include:
- $0.162 on May 19
- $0.161 on May 21 and June 20
- $0.168 on March 3 (highest in early 2025)

While the dividend growth rate dipped -4.85% over the past year—likely reflecting broader market volatility—the ETF's five-year average growth of 19.12% underscores its long-term income potential. QRMI's strategy inherently accepts some yield variability in exchange for downside protection, as seen in its 12.76% trailing yield in 2024 versus 11.84% in early 2025.

Risk Mitigation in Action: Why QRMI Appeals to Defensive Investors

In volatile markets, QRMI's collar strategy offers two key advantages:
1. Downside Protection: The put options act as a safety net. For instance, if the Nasdaq 100 were to drop 10%, QRMI's losses would be capped at 5%, preserving capital during declines.
2. Predictable Income: The sold call options generate recurring premiums, which fund distributions even when the underlying index stagnates.

This structure contrasts with traditional equity ETFs, which face dividend cuts during downturns. QRMI's $16.47 million in net assets and 0.61% expense ratio further suggest efficient management, though its smaller size may amplify price volatility during extreme market shifts.

Investment Considerations and Advice

QRMI is not without trade-offs. Its 0.21% 30-Day SEC Yield (vs. 12.8% trailing) highlights short-term yield volatility, while its 19 dividend increases vs. 16 decreases over three years reflect strategic adjustments to market conditions. Investors should also note that QRMI's protective collar caps upside potential, limiting gains in bull markets.

Recommendation: QRMI is best suited for income-focused investors willing to trade some upside participation for capital preservation. Those seeking steady monthly payouts in a volatile market—such as retirees or conservative allocators—could benefit from its high yield and structured risk controls. However, investors should pair QRMI with broader equity exposure to balance its inherent limitations.

Conclusion

In an era of market uncertainty, QRMI's 12.8% yield and collar-driven risk mitigation position it as a compelling income vehicle. While its yield may fluctuate with market cycles, the ETF's proven strategy and consistent distributions make it a viable addition to portfolios prioritizing stability. As volatility persists, QRMI exemplifies how structured derivatives can turn risk into an income-generating opportunity.

Investors should monitor QRMI's distribution trends closely, but its blend of high yield and protective mechanisms suggests it remains a robust choice for those balancing income and risk in turbulent markets.