TappAlpha SPY Growth & Daily Income ETF (TSPY): This Covered Call ETF Is Outperforming the Rest
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Covered call ETFs can be hit or miss. I’m fine with them lagging a broad market index during a bull run. What matters more is whether the risk-adjusted return remains competitive—meaning the option overlay doesn’t eat up more return than it offsets in risk—and whether distributions are tax-efficient.
That’s harder to pull off than it sounds. Issuers have a wide menu of tools to implement covered call strategies, including ETF options, index options, FLEX options, and even equity-linked notes (ELNs). Strikes and expiries also vary, giving managers flexibility but also leaving room for missteps.
The reality is that most investors, either from lack of knowledge or convenience, default to the biggest names in the space. These funds often attract attention because of herd mentality around high AUM or mental accounting around high yields. In my view, both approaches leave a lot to be desired, since they miss smaller ETFs that quietly deliver better outcomes.
One fund that has caught my attention recently is the TappAlpha SPY Growth & Daily Income ETF (TSPY). With $94.5 million in assets, it’s not at risk of closure. On paper, it looks fairly standard with a 0.68% expense ratio and a 14.35% distribution yield.
But since launching in August 2024, TSPY has quietly outperformed most of the more recognizable covered call ETFs in its peer group. Here’s my analysis of how TSPY stacks up.
How TSPY works
The underlying exposure for TSPY is the S&P 500, which investors already know well. It represents 500 large-cap U.S. stocks, screened for liquidity and earnings consistency, and weighted by market capitalization. That base provides broad, diversified exposure to the U.S. equity market.
On top of that, TSPY layers a zero-day-to-expiry (0DTE) covered call strategy. These are options contracts that expire the same day they’re sold, which allows the fund to harvest time decay (theta) intraday while still retaining full overnight exposure to the S&P 500. This means investors don’t sacrifice upside from overnight price movements, a common trade-off in traditional covered call approaches.
Where TSPY differs further is in execution. Instead of selling calls systematically at preset strikes and expiries, it takes a dynamic, data-driven approach. Strikes and expirations are actively chosen based on market conditions like volatility and catalyst such as earnings, which gives the strategy more flexibility to balance income generation with upside participation.
Another advantage is tax efficiency. The 14.35% yield noted earlier has, at least so far, been paid mostly as return of capital. While final tax treatment isn’t confirmed until year-end, this structure is generally favorable for investors since it isn’t taxed immediately and instead reduces the adjusted cost basis of the investment.
TSPY versus competitors
I backtested total returns, with distributions reinvested and no taxes, from 2024-08-15 to 2025-09-19. Specifically, I compared TSPY against four popular large cap covered call ETF peers:
- JPMorgan Equity Premium Income ETF (JEPI): low-volatility large caps plus up to 15% in ELNs that deliver a 1-month out-of-the-money S&P 500 index call overlay.
- Global X S&P 500 Covered Call ETF (XYLD): S&P 500 exposure with systematic at-the-money one-month calls on 100% of the portfolio.
- Roundhill S&P 500 0DTE Options ETF (XDTE): S&P 500 exposure with 0DTE S&P 500 index calls and weekly distributions.
- Amplify CWP Enhanced Dividend Income ETF (DIVO): concentrated, actively managed basket of roughly 20–30 quality dividend payers with discretionary single-stock call writing.
Over this one-year window, TSPY outpaced JEPI, XYLD, and XDTE on both total return and Sharpe. Only DIVO topped TSPY on risk-adjusted metrics, which tracks its long record as a total-return-first manager that uses calls opportunistically (read my review of DIVO here).
Caveats apply though, as the sample is short, tax treatment varies by investor, and April 2025’s volatility was a meaningful event. Still, for investors seeking an aggressive, SPY-anchored 0DTE approach with strong recent execution, TSPY earned its spot near the top of the peer set.
