With investors expecting a volatile market in 2025, many are turning to options strategies to help smooth the ride — and produce income. Stocks have bounced around this year, with tech names getting rattled by China’s DeepSeek AI model and Trump administration trade policies causing uncertainty. Exchange-traded funds like the JPMorgan Equity Premium Income ETF (JEPI) have been employing options strategies for years, but they are becoming increasingly popular. Morningstar calls these types of funds a “hot corner” of the ETF market. The derivative income ETF category raked in $33 billion in 2024 — bringing the total assets to $97 billion, the fund tracking firm said. That’s up from $3 billion at the end of 2020, according to Morningstar. JEPI YTD mountain JPMorgan Equity Premium Income ETF one-year performance Hamilton Reiner, head of U.S. equity derivatives at JPMorgan Asset Management and manager of the Equity Premium fund, still expects the stock market to deliver low double-digit earnings growth this year across the board, not just in the Magnificent Seven. “If you keep [price-to-earnings] multiples the same or if you have a slight reduction in multiples, we should probably see stocks up high single digits, low double digits,” he said. He also anticipates a slightly higher level of volatility than last year, when the S & P 500 returned 23%. “A strategy like this is going to seek to take advantage of that higher volatility by providing our investors two things — one, maybe a little more income, but also a little more upside,” he said. Reiner’s ETF has a 30-day SEC yield of 7.12%, as of Jan. 31, and an expense ratio of 0.35%. It had assets of $38.71 billion , as of Friday. The fund’s mission is to balance income and total return, Reiner explained. When choosing stocks, the team focuses on those it believes are fundamentally attractive and have persistence of earnings. The team also makes sure there is diversification across all sectors and names, with no single stock allowed to account for more than 2% of the portfolio. The managers also sell out-of-the money options on the S & P 500 , so that investors still get some of the market’s upside. “We ladder and stagger our options, doing a portion of them each and every week, so our strategy is never, ever fully capped out,” Reiner said. Investors get income in the form of the options premiums and any dividends on stocks within the fund. The dividends are a bonus and not the main driver of equity selection, he stressed. Reiner said the strategy is not meant to replace bonds or equities. “You can complement those wonderful allocations by taking some of your stock, some of your bonds, and investing in a strategy like this, but maintaining that same risk profile,” he said. The Equity Premium Income ETF can also be a home for part of investors’ excess cash, he added. Some $6.92 trillion is currently sitting in money market funds, according to the Investment Company Institute . “Cash is sort of like that silent killer,” Reiner said. “It feels good today, but when you start thinking about compounding wealth over the next 10, 20, 30 years, you are really going to be left on the sidelines.”
