Can You Sell Covered Calls on Leveraged ETFs for Income? Yes, But The Yield Is Risky

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The Invesco QQQ Trust (QQQ) is one of the most popular ETFs among options traders. It offers daily-expiring options, dozens of strike prices, high open interest, narrow bid-ask spreads, and substantial implied volatility. All of those factors combine to create attractive option premiums for investors looking to generate income.

The only problem is accessibility. As of June 19, 2026, QQQ trades around $740 per share. Since one options contract controls 100 shares, that means you’d need approximately $74,000 in capital just to sell a single covered call. There is a lower-cost alternative, though probably not the one most investors expect.

The ProShares UltraPro QQQ (TQQQ) is a leveraged bullish ETF designed to deliver three times the daily return of the Nasdaq-100 Index. At roughly $83 per share as of writing, investors need about $8,300 to purchase the 100 shares required for a covered call position.

Now, I want to be very clear: leveraged ETFs were not designed to be long-term investments, much less vehicles for covered call strategies. But retail investors regularly use them that way regardless. So yes, you can absolutely sell covered calls on TQQQ, and the yields can look extremely attractive. The question is whether the risk is worth it.

How Much Income Could You Generate?

As of June 19, 2026, TQQQ trades around $83 per share. Looking at the options chain, investors have access to weekly expirations including July 2, July 10, July 17, July 24, and July 31. For this example, let’s assume a one-month covered call using the July 31, 2026 expiration.

Because TQQQ is a leveraged ETF capable of making large moves in either direction, I’d prefer selling an out-of-the-money call rather than an at-the-money strike. Let’s use the $95 strike. The option currently shows a bid of $3.30 and an ask of $3.60. Taking the midpoint gives us a premium of approximately $3.45 per share.

Since each contract covers 100 shares, that generates:

• Premium received: $345
• Capital required: $8,300
• One-month yield: 4.16%

That’s a substantial premium for a single month. If an investor could somehow repeat the same trade every month at identical premiums, the annualized yield would approach 49.9%. Of course, that assumption is unrealistic. Option premiums fluctuate based on volatility, market conditions, and how far the ETF moves. Still, it illustrates why leveraged ETFs attract covered call sellers.

At expiration, three outcomes are possible:

1. If TQQQ remains below $95, you keep the shares and the entire $345 premium.
2. If TQQQ rises above $95, your shares will likely be called away at the strike price, and you keep the premium.
3. If TQQQ falls sharply, you still keep the premium, but you absorb the losses on the underlying shares.

That last point is where many investors underestimate the risk.  The issue is that selling a covered call requires buying and holding TQQQ beyond a day, which is generally inadvisable.

Why I Wouldn’t Use This Strategy

Over its lifetime, TQQQ has produced eye-popping returns. From February 11, 2010 through June 18, 2026, it generated a 44.3% annualized return according to testfolio.io. The problem is what investors had to endure along the way.

During that period, TQQQ experienced a maximum drawdown of 81.65%, bottoming on December 28, 2022. Investors then waited until December 4, 2024 before recovering their losses. That’s nearly two years underwater.

Remember, when you sell covered calls, you must be comfortable with one of two outcomes:

1. Getting assigned if the ETF rallies.
2. Holding the underlying if it falls.

Getting assigned on TQQQ isn’t the issue. Holding TQQQ through a prolonged bear market is. If the ETF falls significantly below your cost basis, you’ll often find yourself unable to sell attractive covered calls above your purchase price. The strikes that generate meaningful premiums may sit below your cost basis, creating the possibility of locking in losses if assigned.

That makes the strategy far less appealing during extended downturns. Add in TQQQ’s 0.82% expense ratio and the long-term effects of volatility drag, and personally I’d rather sell covered calls on a lower-cost unleveraged ETF. The headline yield may be smaller, but the risk profile is much easier to live with.

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