The Goldman Sachs Nasdaq-100 Premium Income ETF (GPIQ) has done well this year, with its demand from American investors escalating. Its stock has jumped to a record high, while its total inflows jumped by over $1.66 billion. 

The GPIQ ETF has had inflows in all weeks this year, bringing its total assets to over $2.12 billion. This growth happened because of its high dividend yield, which stands at 9.8%. It is also relatively cheaper than JPMorgan’s JEPQ, with its 0.29% expense ratio.

How the GPIQ ETF works

The GPIQ ETF has done well in the past few months, moving from the year-to-date low of $35.85 in April to a record high of $54. This jump happened because of how the fund works.

The GPIQ ETF is a covered call ETF that aims to provide investors with regular dividends. It has a higher yield than the Nasdaq 100 Index and its passive ETFs, like QQQ and QQQM. 

It does that by investing about 80% of its assets in the Nasdaq 100 Index and then writing call options on the fund. A call option gives an investor the right, but not the obligation to buy an asset at a set price before an expiration period. 

In this case, the JEPQ ETF is made up of all companies in the Nasdaq 100 Index, including big names like Nvidia, Microsoft, Apple, and Broadcom. 

Using the covered call approach has its advantages. For example, in periods when the Nasdaq 100 Index is flat or rising gradually, the approach ensures higher returns. That’s because it makes money in the rising index and the premium payment it receives.

On the other hand, when the index is in a strong bull run, it will underperform the market because its appreciation over the exercise price exceeds the income from premiums. 

The latter point explains why GPIQ and other covered call ETFs like JEPI and JEPQ underperform the benchmark in terms of the price and total return. 

This chart shows that the QQQ’s total return stands at 19.5% this year, while JEPQ and GPIQ have returned 12.40% and 17.67% in the same period. 

GPIQ vs QQQ vs JEPQ ETF | Source: SeekingAlpha

Historically, data shows that these ETFs typically outperform the benchmark assets marginally during bear markets. 

Nvidia earnings ahead

The next important catalyst for the GPIQ ETF this week will be the upcoming Nvidia earnings. These numbers are important because Nvidia accounts for about 9.8% of the fund. It is followed by other big-tech companies like Apple, Microsoft, Broadcom, and Amazon. 

Stronger-than-expected results will provide more catalysts for the Nasdaq 100 and the GPIQ ETF. That’s because these numbers will help to provide more color on whether there is still strong demand for its chips. 

Also, investors will be watching whether competition from AMD is hurting its revenue and profitability growth. On the positive side, there are signs that the company’s growth is doing well, as evidenced by results from its biggest clients like Microsoft, Google, and Amazon. 

Also, its top suppliers like TSMC, Samsung, SK Hynix, and ASE Technology have all published strong financial results in the past few weeks. 

Is GPIQ  ETF a good buy?

The GPIQ ETF, like other covered call funds, provides strong returns to investors. It has a nearly 10% dividend yield, which is higher than other funds and the benchmark 10-year bonds, which yield less than 5%.

To a large extent, the GPIQ ETF is not a good investment as its total return is smaller than that of generic funds like QQQ and QQQM. However, it seems like a better investment compared to other covered call ETFs like JEPQ, JEPI, and QYLD.

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