Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTTony DongThu, June 25, 2026 at 5:23 PM GMT+2 4 min readQuick ReadXPAY is not a covered call ETF: The fund uses FLEX options and collateral cash rather than systematically selling upside through covered calls.The 20% distribution is largely return of capital: That can improve tax deferral for some investors, though it also means principal may decline over time.Total return has held up surprisingly well: XPAY has trailed SPY only modestly while significantly outperforming the long-term return profile of many traditional covered call ETFs.Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and TPAY didn't make the cut. Grab the names FREE today.Jack_the_sparow / Shutterstock.comThe risk-and-return profile of most covered call ETFs isn't especially appealing. You cap your upside while retaining most of the downside exposure. On top of that, the distributions investors receive are not free money. The ETF's net asset value (NAV) falls by the amount distributed on the ex date, and those payouts can create taxable events.Still, covered call ETFs remain extremely popular, particularly among retirees. A large reason comes down to behavior. Many investors are comfortable spending dividends and distributions, but dislike selling shares to fund withdrawals, even though the two are mathematically very similar. If the goal is a hands-off decumulation solution, however, there may be better options available. One fund that has been on my radar for some time is the Roundhill S&P 500 Target 20 Managed Distribution ETF (XPAY). The objective is straightforward: pay 20% annually to investors. The majority of those distributions are currently classified as return of capital.Importantly, Roundhill explicitly notes that XPAY is generally not appropriate for investors who do not want their principal to decline over time or who are uncomfortable receiving return-of-capital distributions. This is primarily a decumulation-focused strategy. What's interesting is that despite targeting such a large payout, XPAY's total return has remained surprisingly competitive.Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and TPAY didn't make the cut. Grab the names FREE today.Over the 1.63-year period from Oct. 31, 2024, through June 17, 2026, XPAY generated a cumulative total return of 30.64%, compared with 32.63% for the SPDR S&P 500 ETF Trust (SPY). It still lagged the benchmark, but by far less than many covered call ETFs over a similar period.The reason becomes clearer once you understand how XPAY actually works. On that note, I I recently spoke with Thomas DiFazio, ETF Strategist at Roundhill Investments, about the structure behind XPAY. Here's what he told me.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info