JEPI vs. JEPQ: JPMorgan’s Covered Call ETFs

Covered call ETFs like the JPMorgan Equity Premium Income ETF (JEPI) and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) have soared in popularity as investors search for income strategies in a persistently low-yield environment.  

These funds, together managing over $60 billion in assets, offer the appeal of consistent income while potentially buffering against downside volatility—two attractive traits in today’s uncertain market landscape.  

While both use similar option-based income strategies, their equity exposures and outcomes differ, making it essential for advisors and investors to understand their nuances.  

In this JEPI versus JEPQ data dive, we’ll explain how these ETFs work, break down their differences in performance, yield, and composition, and provide insights on which fund may be better suited for different investment goals.

JEPI vs. JEPQ: How Covered Call ETFs Work

Covered call ETFs combine stock ownership with the sale of call options—contracts that give buyers the right to purchase the ETF’s stock holdings at a set price. In exchange for this right, option buyers pay a premium, which becomes income distributed to investors.  

The trade-off? If the underlying stocks rise sharply, the fund sacrifices some upside potential, since it’s obligated to sell those stocks at the agreed-upon price. Thus, these ETFs generally perform best in flat or mildly bullish markets while producing high levels of monthly income.

How JEPI Works

JEPI primarily invests in large-cap U.S. stocks with favorable risk/return characteristics within the S&P 500 index. It uses an equity-linked note (ELN) structure to write call options, generating monthly income. This structure allows JEPI to distribute yields between 7%-10%, or sometimes higher, depending on market conditions. With lower exposure to volatile tech names, JEPI is often viewed as a more defensive income play.  

How JEPQ Works

JEPQ takes a more growth-oriented approach, investing primarily in Nasdaq-100 stocks. Like JEPI, it also uses ELNs to implement a covered call strategy but writes options on the Nasdaq-100 index, which tends to be more volatile. This leads to potentially higher premium income but also introduces greater drawdown risk during market corrections.  

JEPI or JEPQ: Which One Is Right for You?

While JEPI and JEPQ are both actively managed covered call ETFs with similar objectives, they may not appeal to the same type of investors. Here’s who may want to invest:

JEPI may appeal to conservative investors or retirees seeking income with lower volatility and less exposure to the high-growth, higher volatility tech sector. Income-focused investors in or near retirement may prefer JEPI for its steadier ride compared to the S&P 500.

JEPQ could be better suited for those who want exposure to tech-driven growth with a side of income and those who can tolerate higher volatility. Younger investors looking to reinvest dividends and accumulate shares may favor JEPQ for its growth potential.

JEPI vs. JEPQ: Side-by-Side Comparison

Source: FactSet data as of May 7, 2025. 

Pros and Cons of Covered Call ETFs

Covered call ETFs are popular, but they’re not for every investor. Here are the pros and cons to consider before buying shares of either fund:

Pros

• High monthly income yield
• Partial downside protection
• Useful in range-bound markets

Cons

• Capped upside due to covered calls
• Underperformance in strong bull markets
• Tax complexity (premiums may be taxed as return of capital or ordinary income)

2025 Outlook: JEPI vs. JEPQ in a Volatile Economy

As 2025 unfolds amid growing fears of a prolonged trade war, sticky inflation and a potential U.S. recession, both JEPI and JEPQ may remain relevant tools for investors. In an environment where the Fed may need to cut rates and volatility stays elevated without extreme downside risk, the option premiums generated by both ETFs could remain robust.

JEPI may outperform if markets turn defensive, as its low-volatility holdings are more resilient during downturns.

JEPQ could lag during risk-off periods but may shine if tech rebounds on improving economic sentiment or AI-driven growth.

Regardless of macroeconomic outcomes, both funds offer a unique blend of income and equity exposure. Advisors should emphasize the importance of aligning either ETF with clients’ risk tolerance, income needs and market outlook.