Home›ETFs & Funds›ETFs›State Street ETF boosts yield by selling covered call…

State Street ETF boosts yield by selling covered call options on tech

XLKI launched in July 2025, and its dividend yield is 19.7%, far above its benchmark ETF XLK’s 0.4%.

Reported · Written up by our desk · ETFs

ETF Trends reports that a stretch of volatility in technology stocks in late 2025 and early 2026, driven by anxiety over AI infrastructure spending and concerns about disruption to software business models, led investors to seek income rather than outright exposure.

According to State Street Investment Management, the State Street Technology Select Sector SPDR Premium Income ETF, XLKI, fell 3.8% during the pullback, versus a 13.3% drop in the S&P 500 Technology sector. The fund collects high options premiums by selling call options, generating upfront cash but capping some of the gains on the covered shares.

XLKI, which launched in July 2025, holds the same stocks as State Street’s XLK but uses a dynamic options selection method based on delta, a measure tied to the probability a stock will move above a set price by a certain date. State Street says this allows the strategy to shift with market conditions instead of using a single fixed target.

State Street also says options premiums have historically made up more than 80% of the dividend yield across its 11 sector-based premium income ETFs, with average distribution yields in the mid-teens. Even with the income strategy, XLKI carries a beta of about 0.7 to the underlying sector, capturing roughly 70% of sector price moves, while its return since inception has trailed the underlying sector by 11.9%.

Latest closeS&P 500 7,785.76 ▼0.2%

More like this

Sources