One of the best ways to build passive income is by jumping into dividend-paying ETFs.
In fact, here are two ETFs that rely on the strength of options.
Defiance Nasdaq 100 Lightning Spread Income ETF (SYM: QLDY)
With an expense ratio of 1.04% and a twice-weekly dividend, the Defiance Nasdaq 100 Lightning Spread Income ETF (QLDY) uses zero-days-to-expiration (0DTE) put spreads in an effort to capture time decay from short-dated options. It also seeks income and capital growth by using call options and DTE put spreads on the Nasdaq 100 Index.
It does not invest directly in Nasdaq 100 stocks.
The fund also pays dividends twice weekly. It just paid a dividend of just over 17 cents on January 15. Before that, it paid out just over 18 cents on January 12.
Since it started trading on September 18 at $48.60, the QLDY ETF is now at $46.62. With the QLDY ETF investors seeking regular income and exposure to large cap stocks have benefited from the fund’s strategy of generating and distributing income twice a week.
Also, as noted in a Defiance ETF press release, “Unlike traditional ETFs that pay quarterly or monthly, QLDY is the first U.S. ETF designed to distribute income twice weekly. This structure seeks to align income delivery more closely with today’s fast-paced markets and the needs of tactical and income-focused investors.”
YieldMax Target 12 Big 50 Option Income ETF (SYM: BIGY)
With an expense ratio of 0.99%, a distribution rate of 11.36%, and a monthly dividend, the YieldMax Target 12 Big 50 Option Income ETF (BIGY) is an actively managed ETF that targets a 12% annual yield and capital appreciation by investing in 15 to 30 U.S. large cap stocks. To generate income, the ETF primarily sells call options and call spreads on its holdings. It also generates capital appreciation through direct equity investments.
It pays monthly dividends. Most recently, the BIGY ETF paid a dividend of just over 53 cents per share on January 2. Before that, it paid a dividend of just over 53 cents on December 3.
Since bottoming out at around $37.66 in April, the BIGY ETF rallied to a recent high of $52. Fueling upside, the ETF holds a large number of strong tech stock holdings, which have greatly benefited from artificial intelligence demand, an increase in AI capex, and strong earnings growth and guidance. In addition, with the AI story still gaining momentum, BIGY ETF holdings should benefit, as should the BIGY ETF.
According to Grand View Research, the global AI market, valued at about $279.22 billion in 2024, could be worth more than $3.4 trillion by 2033.
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Written by Ian Cooper