Index option income was not one bet this year
Through October 2, 2026, Index Option Income funds with a full year ran from a 17.1% loss to a 93.6% gain, and the two largest, KNG and ACYN, are not the same kind of fund.
Key takeaways
In the year through Friday, October 2, 2026, the index option-income funds that have been open a full year ran from a loss of 17.1% to a gain of 93.6%, counting distributions as reinvested. The median, the midpoint of that group, was 11.7%.
The strongest and weakest full-year total returns
The category has 25 funds. Twenty-four of them held $10.3 billion, and the last is too small to change that total. Just over half of that money is in the two largest, both First Trust funds.
The rise in semiconductor stocks was already in place by the end of June. China internet stocks had fallen sharply by then. On Wednesday, September 16, the Federal Reserve raised its target range by 25 basis points, a quarter of a percentage point, to 3.75% to 4%, the first increase since 2023.
The largest fund's price fell
KNG held $3.2 billion. It owns S&P 500 companies with a long record of raising dividends, and it sells call options on part of that basket. As of Monday, August 31, First Trust had calls written on 19.55% of the fund.
Selling a call collects cash and gives a buyer the right to take those shares at a set price, so the fund gives up some of the gain above that price, on that slice only.
Over the year through October 2, KNG returned 6.2%. NOBL holds those same dividend-raising stocks, the S&P 500 Dividend Aristocrats, without the calls, and returned 7.5%.
A fund that holds the S&P 500, SPY, returned 16.2%. Most of the gap between KNG and SPY was those stocks.
KNG's share price fell 2.4%. NOBL rose 5.2%.
KNG’s total return stayed near NOBL; its price did not
- Total return
- Price
- KNG
- Total return +6.2%
- Price −2.4%
- NOBL
- Total return +7.5%
- Price +5.2%
- SPY
- Total return +16%
- Price +15%
As of Monday, August 31, First Trust put the distribution rate, the annualized payout, at 8.49%. The 30-day SEC yield, which counts net investment income, was 1.76%. Most of the cash was not net investment income.
That payout kept the total return close to NOBL, and it left the price behind.
The year's best results came from semiconductor stocks
The funds at the top of the range do not sit on a broad index. CHPY holds a focused list of semiconductor stocks, sells options on them, and aims to pay holders every week. Its total return was 91.2%. Its share price rose 25.2%.
SMH, a fund that holds semiconductor stocks, returned 87% over the same year, and nearly all of that was price. That 87% is the sector's year, not CHPY's own stocks without the calls.
SOXY, a smaller fund, also holds semiconductor stocks. It sells call spreads and targets a 12% annual payout. Its total return was 93.6%, and its price rose 71.6%.
Price captured far less of CHPY’s year than of SOXY’s
- Total return
- Price
- CHPY
- Total return +91%
- Price +25%
- SOXY
- Total return +94%
- Price +72%
From the last day of June to the last day of September, in total return, SMH fell 7.1%. CHPY fell 11.7%, and SOXY fell 12.7%.
Both fell further than the semiconductor fund. That extra loss is not a clean read on the options, because the baskets are not the same.
The year's worst result came from China internet stocks
KLIP buys a China internet stock fund, KWEB, and sells calls on it. Over the year KWEB returned -41%. KLIP returned -17.1%, and its share price fell 35%.
The calls are on the fund KLIP holds, and they left a smaller loss than those China stocks.
A large new fund has not tested its barrier
The other large First Trust fund has not had a year. ACYN launched in February and held $2.3 billion by October 2.
It holds Treasury bills and swaps meant to copy a ladder of autocallable notes. Those notes pay a coupon while a reference market stays above one line, and they can pass that market's loss to the holder if it finishes below a lower line, the maturity barrier.
In the quarter ended Wednesday, September 30, ACYN returned 3.0%. As of Monday, August 31, its distribution rate was 10.01% and its SEC yield was 2.88%. A smaller fund on the list, CAGE, is built to reinvest its coupons rather than pay them, and it has not paid a distribution.
As of Monday, September 28, First Trust counted 24 monthly contracts, with an average life of 16.8 months, and said none within a year of maturity were below the maturity barrier. The fund had been open for less time than those contracts have left to run. The barrier that can cost a holder money has not been tested in this fund's life.
ETFs in this story
Frequently asked questions
How wide was the range of full-year returns?
Index option-income funds open a full year ran from a 17.1% loss to a 93.6% gain through October 2, 2026, and the median was 11.7%.
How do the two largest funds differ?
KNG owns S&P 500 companies with a long record of raising dividends and sells calls on part of that basket, while ACYN holds Treasury bills and swaps meant to copy a ladder of autocallable notes.
Where did the best and worst results come from?
SOXY and CHPY hold semiconductor stocks and led with total returns of 93.6% and 91.2%, while KLIP buys a China internet fund and sells calls on it and lost 17.1%.
Has ACYN's maturity barrier been tested?
As of September 28, none of its contracts within a year of maturity were below the barrier, and the fund had been open for less time than those contracts have left to run.
