How Recession Proof Are The NEOS ETFs? SPYI, QQQI and Others

One of the most common questions I get over on our Patreon is what's going to happen to the NEOCCTFs like Spy and QQQI in the event of a recession or just a prolonged bare market, something such as the 2008 financial crisis or a COVID-like plunge that happened in 2020. And it's a really important question because I know there are a lot of income investors who are structuring their high yield portfolios around these NEOCTFs. Many people are either currently depending on or plan to depend on their lineup of high yielding funds. Obviously, if you're allocating a lot toward a particular investment and depending a lot on it to supply you with the income you need, you want to make sure that it can withstand a variety of different market conditions. And for me personally, all of my NEOS ETFs account for roughly 15% of my portfolio, and I intend to keep building that up over time. We all know that covered call ETFs have limited upside, including the ones by NEOS. It's a trade-off that exists with these doubledigit dividend yields. And we see this all the time. If you compare SPY to SPY, the S&P 500 index fund, SPY always trails the index over the long term. During periods of rapid growth in the S&P 500, SPY eye can only appreciate so much. So what would happen in the event of a very fast 34% crash? That's how much ticker spy fell during the pandemic from peak to trough. Or what about a prolonged 49.17% crash, which is what happened during the GFC from October of 2007 to March of 2009. How would Spy Eye and QQQI or maybe even their boosted alternatives like X Spy and XQQI do? Would they ever be able to recover in share price and distribution amounts? Since all covered call funds again have limited upside and most CC funds have not been around during an event like this, a common thing people will do is look at other covered call funds that did exist during difficult market conditions to see how they performed. Given how these types of ETFs have only become popular in the past few years, you might assume that there weren't any around during the GFC. But there actually was a covered call ETF out in 2007, which is the Invesco S&P 500 by ETF, ticker PBP. We can see that this ETF did recover a lot, but it never made it back up to $25 a share it had when it IPOed. Even during the COVID pandemic, there still were not a lot of examples that we can point to. NEOS didn't have any ETFs out at that time, not including QQQ, which they acquired from Nationwide, who launched it in 2019. And most of their peers like Roundill, YieldMax, Curve, or Goldman Sachs, didn't have any covered call funds out either. But there was one that did, which is Global X. The first mainstream covered call ETF, QYLD, did exist during the pandemic. And looking at its share price performance following the event, it's not a pretty picture. Qyld never recovered to its preandemic price. So people will point to these two examples and be concerned for the NEOCTFs. But in the case of PBP and QYLD, these examples cannot be compared to SPY, QQQI, or any of the NEOS funds. Invesco and Global X use radically different strategies on their funds, which I would argue are not better. For starters, both PBP and QYLD use at the money covered calls, whereas the NEOCTFS use out of the money calls. Funds that sell at the money calls can offer massive yields but give up all immediate upside potential making them more susceptible to nav erosion. An at the money call option has a strike price that's exactly equal to the current market price of the underlying asset. Whereas funds that write say 2 to 5% out of the money calls preserve some room for the fund shares to appreciate. But the differences don't stop there. The NEOS ETFs are actively managed, whereas QYLD and PBP are passively managed. If the fund managers over at NEOS think we're headed toward a bare market, then they have the ability to make strategy adjustments to their funds to preserve their navs. The Global X Fund uses the exact same strategy no matter how the market is performing. And the same is true for PBP. They're both passively managed ETFs. These two facts would help the NEOS funds potentially provide better downside protection and higher upside potential. However, if there was a very quick market crash, like 10% in a day, then the fund managers would not be able to make changes that quickly. We might not have had the opportunity to see how SPY, QQQI, or any other NEOS funds would have performed starting in March of 2020, but we've already had a good test for both of these ETFs, which was Liberation Day. On April 2nd of 2025, President Trump unveiled a sweeping package of reciprocal import tariffs, which sent the major indexes falling quickly. In five days, SPY fell by 12.1% and QQQ ultimately fell by 23% from peak to trough. This event was by all accounts considered a stock market crash as it was that serious. The results we're about to look at are going to highlight Neos's superior option strategy. Spy Eye fully recovered from the event, as did QQQI. This is really important because most of QQQI's peers still have not recovered from Liberation Day. QYLD hasn't recovered from Liberation Day. QDTE by Roundill hasn't even come close to recovering from Liberation Day as well. QDTY by YieldMax launched in the middle of liberation day and it also hasn't recovered. SPYI and QQQI stand out as offering better upside and strategies to prevent downside when compared to QYLD, QDTY, and others. So, in the event of a COVID-like plunge or a long bare market, I would feel safer having my money in these funds as opposed to others. XY and XQQI weren't around during Liberation Day, so there are some unknowns about how these funds will do. I can't say that I'd feel comfortable holding them in a market plunge because they use leverage, which would amplify losses and take much longer for them to recover. I am confident that SPY and QQQI would have recovered after the events in 2020 if they were around. If we look at the S&P 500 again, we can see that the index fell by over 17% within this two-month time span and it took them over four months to recover. SPY I experienced the same decline, actually a little less because the fund managers were actively managing it and were employing tactics to prevent further declines, but it recovered in a little under 7 months. Every market crash and recovery is going to be different, but this recovery time was one of the best among all covered call ETFs. But another thing, too, is that you should always be well diversified. I would caution against those who put their entire income portfolios just in covered call ETFs. Having your money in a lot of different sectors and investment types adds safety to your income portfolio, which if you're planning on living off your income portfolio, is extremely important. Another point is that there are no truly safe places in a crash. There are no sectors or investment types that are completely safe from dividend cuts. And it's important that you don't refuse to make investment decisions because someday there might be a tremendous crash. All of us might never live to experience another great depression or another 2008 financial crisis or one could be coming next week. Do what you can by diversifying and picking investments that don't have a history of nav erosion. Let me know your thoughts in the comments. If you want to connect with me and see what I'm trading in my high yield dividend portfolio, then feel free to check out the Patreon. You'll gain access to our high yield investing community as well as access high yield investing resources like the BDC master spreadsheet that's updated monthly and the essential dividend tax guide. But with that being said, thanks for watching.