Apple Soared 15% in July, but GPIQ Holders Lost 6%: The Hidden Options Tax on Covered-Call ETFs

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them. © 2024 Getty Images / Getty Images News via Getty Images If you bought Goldman Sachs Nasdaq-100 Core Premium Income ETF (NYSEARCA:GPIQ) at launch expecting to capture the Nasdaq-100’s upside while collecting high monthly income, you may have been disappointed in July. Apple (NASDAQ:AAPL | AAPL Price Prediction), the fund’s largest single exposure, ripped 15.23% higher in the month on a blockbuster earnings beat. GPIQ fell 6.1% during the same period. That performance gap reflects the fund’s strategy working exactly as designed. What You’re Actually Paying GPIQ has an expense ratio of 0.29% a year, or roughly $29 annually per $10,000 invested. Set against Invesco QQQ Trust (NASDAQ:QQQ), the mainstream Nasdaq-100 mirror commonly quoted around 0.20% ($20 per $10,000), the fee gap looks trivial. Over 20 years, that spread compounds to just a few hundred dollars. The higher cost sits elsewhere. Since GPIQ launched on October 26, 2023, the fund’s total return with distributions reinvested is 89.08%. QQQ climbed 89.21% on price alone from October 2, 2023, before you add QQQ’s own dividend stream. Apple, the top holding, returned 94.31% over that stretch. Even with the addition of the premium income stream, GPIQ underperformed when compared to QQQ and its top holding. The Part the Factsheet Doesn’t Highlight GPIQ layers a dynamic call overlay on a Nasdaq-100 basket. The manager sells call options against the portfolio to harvest premium, which becomes the “core premium income” in the name. Every dollar of premium collected comes with a ceiling attached. When names like Apple rally past the strike price of the written call, the fund owes the option buyer the difference, and that gain leaves the shareholder’s pocket. Apple’s July run shows the trade in detail. The company reported Q3 FY26 EPS of $2.02 versus $1.89 expected, a 6.8% beat, with revenue up 16.36% and iPhone revenue climbing to $54.25 billion. Tim Cook called it Apple’s “strongest June quarter ever, with double-digit revenue growth across iPhone, Mac and Services.” During this time, GPIQ collected its option premium and handed the rally over. Distributions carry a second, more subtle cost. Covered-call income funds routinely classify a portion of monthly payouts as return of capital, which lowers your cost basis rather than paying you true earned income. That defers tax rather than eliminating it, and it means the yield printed on the marketing page is not all fresh money. If you hold GPIQ in a taxable account, check the fund’s 19a notices before you spend the check. The Cheaper Mirror QQQ holds the same 100 Nasdaq names at cap weights, charges less, and writes no calls against your winners. At the same time, QQQ pays a modest dividend and lets Apple, Microsoft, and Nvidia compound uncapped. Since GPIQ’s inception, QQQ has climbed 89.21% on price alone, and its trailing one-year return of 20.34% tracked close to GPIQ’s 21.04% total return despite carrying no income sleeve. The trade-off is real: QQQ’s yield sits under 1%, while GPIQ targets high single-digit annualized income. If you need cash now, GPIQ can deliver. However, if you need growth compounding for decades, the simpler product has done the same job with the cap removed. What This Means for You The question worth asking is whether the premium income of GPIQ is compensating you for the biggest winners you are quietly forfeiting. In a flat and/or choppy market, the overlay could earn its keep. That said, in a Nasdaq rally driven by a handful of mega-caps like Apple, it charges a fee that never shows up on the expense-ratio line. Contact [email protected] for any questions or corrections.