QYLD: Why Its Rigid Covered Call Strategy Limits Total Returns and Underperforms Peers

The Global X Nasdaq 100 Covered Call ETF (QYLD) has long been a staple for income-focused investors seeking exposure to the Nasdaq 100 index while generating yield through a covered call strategy. However, as market dynamics evolve and newer, more flexible strategies emerge, QYLD's rigid approach is increasingly exposed as a liability. This article examines how QYLD's outdated methodology-anchored to at-the-money call writing and a lack of strategic nuance-has constrained its total returns and left it trailing behind peers like QQQI and XLQ.

A Rigid Strategy in a Dynamic Market

QYLD's core strategy involves selling at-the-money call options on the Nasdaq 100 index on a monthly basis, with strike prices aligned to the index's value at initiation. If at-the-money options are unavailable, it defaults to the next closest out-of-the-money strike according to its strategy. While this systematic approach ensures predictability, it lacks adaptability to shifting market conditions. For instance, in a rising market, QYLD's at-the-money calls cap upside potential, while in a volatile environment, the 50% probability of assignment for these strikes increases risk of premature share turnover.

This rigidity contrasts sharply with the strategies of newer peers. The NEOS Nasdaq 100 High Income ETF (QQQI), for example, employs a data-driven approach that dynamically adjusts strike prices and expiration cycles based on volatility and market forecasts. As of December 2025, QQQI offered covered call trades with expected returns ranging from 0.92% to 1.10% per trade, translating to annualized returns of 5.27% to 24.89%. By contrast, QYLD's fixed methodology has yielded a total return of 21.62% from 2023 to 2025, significantly lagging QQQI's 39.85% over the same period.

Peer Benchmarking: Total Returns and Yield

The performance gap between QYLD and its peers is stark. From 2023 to 2025, QYLD's annualized total return stood at 11.70%, while QQQI achieved 20.88%. This underperformance is not merely a function of yield. While QYLD's 13% distribution yield is attractive, its capital appreciation potential is stifled by the capped upside of at-the-money calls. In contrast, QQQI's strategy- selling calls with varying strike prices and expiration dates-retains more equity upside, allowing it to outperform in both bullish and sideways markets.

The Technology Select Sector SPDR ETF (XLQ) further illustrates this trend. Though less data is available for XLQ, its covered call strategy emphasizes flexibility in strike selection and expiration cycles. For example, XLQ's approach includes selling out-of-the-money calls with expiration dates ranging from 30 to 45 days, balancing premium decay and market predictability. This adaptability has enabled XLQ to generate higher returns in volatile environments, where QYLD's rigid structure struggles according to market analysis.

Concentration Risk and Strategic Limitations

QYLD's underperformance is compounded by its portfolio concentration. Over 57% of its assets are concentrated in the top 10 Nasdaq 100 stocks, exposing it to sector-specific risks. This lack of diversification amplifies downside vulnerability, particularly in a market where megacap stocks dominate. Meanwhile, peers like QQQI and XLQ employ broader, more balanced strategies that mitigate concentration risk while maintaining yield generation according to market research.

Conclusion: A Call for Strategic Evolution

QYLD's rigid at-the-money covered call strategy, while historically effective in low-volatility environments, is increasingly ill-suited to today's dynamic markets. Its inability to adapt to shifting volatility, coupled with high concentration risk, has left it trailing peers that employ more flexible, data-driven approaches. For investors seeking income and capital appreciation, alternatives like QQQI and XLQ offer superior total returns and strategic agility. As the options landscape evolves, QYLD's outdated methodology may struggle to justify its place in a modern portfolio.