Covered Call ETF Scoring Methodology

Our Philosophy

CoveredRank evaluates covered call ETFs on objective, reproducible criteria. We have no financial relationship with any ETF issuer. No fund pays to be included or ranked higher. Transparency is the foundation of trust.

Universe

We cover diversified covered call ETFs listed in the United States.

We exclude:

Single-stock covered call ETFs (TSLY, NVDY, etc.)
Bond covered call ETFs
Crypto covered call ETFs
Leveraged or inverse products
ETFs that sell volatility futures rather than equity covered calls

Benchmarks

Benchmark	ETFs
SPY	JEPI, SPYI, GPIX, DIVO, XYLD, XYLG, PBP, PUTW, ISPY, BALI, SIXH, ETV, FTHI, RSPA
QQQ	JEPQ, QQQI, GPIQ, QYLD, QYLG, QQQX, FEPI, IQQQ, QQA, QDVO
IWM	RYLD, IWMI
EFA	IDVO
KWEB	KLIP

All comparisons use total return (price + dividends reinvested) for both ETF and benchmark.

Time Windows

Window	Description	Availability
Since Inception	Full history from ETF launch	All ETFs \| Free
3 Years	Rolling 36 months	ETFs with 3+ years \| Pro
1 Year	Rolling 12 months	All ETFs \| Pro
3 Months	Rolling 3 months	All ETFs \| Pro

Maturity Rating

Rating	Description
2 stars	Less than 2 years — interpret with caution
3 stars	2 to 3 years
4 stars	3 to 5 years
5 stars	More than 5 years — full cycle tested

The 6 Scoring Criteria

Criterion 1 — Total Return vs Benchmark (25%)

capture = etf_cumulative_return / benchmark_cumulative_return

score = min(10, max(0, capture × 10))

Why it matters: Total return capture over a full cycle is the most honest measure of long-term value.

Criterion 2 — Downside Protection (25%)

down_months = months where benchmark return < 0

etf_down = sum(etf returns in down months)
bench_down = sum(benchmark returns in down months)
protection = 1 - (etf_down / bench_down)
score = min(10, max(0, protection / 0.50 × 10))

Example: JEPI absorbed 61.7% of SPY's losses in down months → protection = 38.3% → score = 7.67

Why it matters: This is the primary reason investors choose covered call ETFs. We measure whether that protection is real.

Criterion 3 — Upside Participation (25%)

up_months = months where benchmark return > 0

upside_ratio = sum(etf returns in up months) /
sum(benchmark returns in up months)
score = min(10, max(0, upside_ratio × 10))

Example: JEPI captured 59.8% of SPY's gains in up months → score = 5.98

Why it matters: Covered calls structurally cap upside. This criterion measures the cost of that cap.

Criterion 4 — Distribution Consistency (15%)

cuts = months where distribution < previous × 0.85

score = max(0, 10 × (1 - cuts / total_months))

Why it matters: Income investors depend on predictable cash flow. Frequent cuts undermine the core value proposition.

Criterion 5 — Expense Ratio (5%)

score = max(0, min(10, 10 × (1 - (ter - 0.20) / 0.80)))

Examples:

GPIX/GPIQ at 0.29% → score = 8.88
JEPI/JEPQ at 0.35% → score = 8.12
SPYI/QQQI at 0.68% → score = 4.00
FTHI at 0.85% → score = 1.88

Why it matters: Fees compound over time and directly reduce net returns.

Criterion 6 — Liquidity/AUM (5%)

score = min(10, log10(aum_millions) / log10(50000) × 10)

Why it matters: Larger funds have tighter bid-ask spreads and lower risk of closure.

Final Score Formula

score_final = (

Total Return × 0.25 +
Downside Protection × 0.25 +
Upside Participation × 0.25 +
Consistency × 0.15 +
Expense Ratio × 0.05 +
Liquidity × 0.05
)

All scores on a 0-10 scale.

Data Sources

Data	Source	Frequency
Monthly prices	Yahoo Finance via yfinance	Monthly
Distributions	Yahoo Finance via yfinance	Monthly
Expense ratios	ETF issuer prospectuses	Annual
AUM	ETF issuer websites	Monthly

Risk Metrics

Beta, volatility, upside capture and downside capture are calculated by CoveredRank from monthly total-return series. They are not sourced from issuers, and they are not directly comparable to figures published by other sites unless the period, frequency and formula match exactly.

Metric	Formula	Window
Beta	Covariance of monthly fund returns and monthly benchmark returns, divided by the variance of monthly benchmark returns.	Common months since fund inception
Volatility (annualized)	Standard deviation of monthly fund returns, multiplied by the square root of 12.	Common months since fund inception
Upside capture	Average fund return in months when the benchmark rose, divided by the average benchmark return in the same months.	Common months where benchmark return > 0
Downside capture	Average fund return in months when the benchmark fell, divided by the average benchmark return in the same months.	Common months where benchmark return < 0

Returns are monthly, computed from adjusted close prices (distributions reinvested).
The window starts at the fund's first common month with its benchmark. Funds with less than 24 common months are not assigned risk metrics.
Capture ratios are expressed as percentages. A fund with 60% upside capture has historically kept 60% of the benchmark's average gain in up months.
Metrics are recalculated each time the underlying price series is updated (monthly).

Interpretation is limited to the observed window. A beta below 1 or a capture below 100% does not imply that these values will persist in future periods.

Known Limitations

Bull market bias: 2020-2025 was an exceptional bull market. ETFs launched during this period may not reflect performance across a full cycle.
Short track records: ETFs with 2 stars should be interpreted with caution. QQQI and GPIQ have not experienced a 2022-style correction.
Price return only for distributions: Yahoo Finance adjusted close prices include dividends but may have minor discrepancies vs actual distribution amounts.

Planned V2 Improvements

CBOE BXM/BXMD as secondary benchmarks
Tax efficiency scoring (Section 1256 vs ordinary income)
Rolling Sharpe ratio by time window
Correlation matrix between ETFs
Comparison tool (/compare)

Disclaimer: CoveredRank provides independent educational content only. Not financial advice.