Covered-call strategies generate income by selling options on stocks already held, allowing investors to earn premiums in rising, flat, or even modestly declining markets. Some funds, like those pairing covered calls with dividend-growth equities, can struggle to add diversification or keep pace during strong bull markets. 

More targeted approaches, such as sector-specific energy covered-call funds, have shown smoother returns and better benchmark-relative results by actively managing options at the stock level. 

Broad index-based strategies tied to volatile segments like small caps can deliver steady income but often cap upside too aggressively to fully compensate investors. At the far end, single-stock covered-call products can post enormous yields, but their success depends heavily on continued strength in one company, making sustainability a key risk to watch.

Finsum: Exchange-traded funds make this approach accessible to newer investors to this strategy.