JEPI's income comes from calls on the S&P 500, not from the stocks it owns

J.P. Morgan's JPMorgan Equity Premium Income ETF, JEPI, seeks current income, and the chance that the share price rises. It sells call options on the S&P 500 through notes, and it holds stocks meant to move less than that index.

The fund held $45.27 billion at Sept. 30, 2026. The annual expense ratio is 0.35%. The summary prospectus, dated Nov. 1, 2025, says the adviser pays substantially all of the fund's other expenses.

How a sold call pays the fund

A call option gives its buyer the right to the gains above a set price. The seller collects a cash premium for giving up that right. The prospectus says the premium equals the value of the option at the time of the trade.

JEPI does not sell the calls on an exchange. It buys equity-linked notes, issued by banks, broker-dealers or their affiliates, with the sold calls built in. The prospectus says those notes provide a recurring cash flow from the premiums, and that the cash is an important source of the fund's return.

The calls are on the index, not on the stocks in the portfolio. The prospectus says the options inside the notes are based on the fund's benchmark, the S&P 500 Total Return Index, the S&P 500 with dividends included, or on funds that track that index. J.P. Morgan's fact sheet compares the fund with the S&P 500 Index and says those index levels are in total return.

Because the fund seeks lower volatility than that benchmark, the prospectus says, it may underperform, particularly in rising markets. On the calls, the fund keeps the premium, and its profit from a rising index stops at a set price plus that premium.

At June 30, 2026, the notes were 13.7% of net assets, the weight in the annual report. The prospectus allows up to 20% of net assets in the notes.

The annual report says each note has a coupon, the interest it pays, and that this coupon is recorded as interest. In the year ended June 30, 2026, interest from outside firms was $2.98 billion. Dividend income was $584 million, and the filing does not say how much of the interest was the notes' coupons.

J.P. Morgan's fund story, the firm's marketing piece dated Sept. 30, 2026, measures the two sources from the May 20, 2020 launch through that date. The rolling 12-month options-premium average was 7.14%, and the dividend average was 1.43%. The footnote says those figures are calculated before fees and stand for the returns of the stock portfolio and the options overlay.

That fund story, not the prospectus, describes the overlay as one-month call options struck out of the money. Out of the money means the index has room to rise before the sold calls start giving away the gain.

The notes are unsecured debts of the firms that issue them, the annual report says. If those firms fail to make payments when due, or default completely, the prospectus says the fund can lose what it is owed.

If the prices the notes are linked to move in an unexpected way, the prospectus says, the fund may not get the result it expected from a note, and the loss can include the entire amount invested in it.

Stocks meant to move less

The stocks are not the S&P 500. The prospectus says the fund seeks a lower volatility level than the U.S. large-cap market, through an actively managed portfolio.

At Sept. 30, the fact sheet showed 140 holdings, with Microsoft, the largest, at 2%.

Information technology was 15.6% of the fund, 24.1 percentage points below the S&P 500, which puts the index at 39.7%.

Over the 36 months of monthly returns ended that day, the fact sheet's standard deviation was 7.78 for the fund and 12.42 for the S&P 500. That is J.P. Morgan's measure of how widely those monthly returns spread around their average.

What holders have been paid

From the May 20, 2020 launch through Sept. 30, 2026, total return at net asset value was 10.81% a year, against 17.72% a year for the S&P 500 Index on the same fact sheet. The chart of that span assumes dividends and capital gains were reinvested, so the fund's monthly checks are included in its 10.81%.

The prospectus says the fund seeks, under normal circumstances, monthly distributions at a relatively stable level. It does not guarantee that a distribution will be paid, or that the level will hold.

The fund story says the fund pays out all the income it earns each month. Payments with ex-dates from Feb. 2 through Oct. 1, 2026 ranged from $0.34 a share on Oct. 1 to $0.45 on May 1.

As of Sept. 30, the 30-day SEC yield was 7.45%. That is an estimate of income earned over 30 days, expressed as an annual rate based on the share price at the end of the period. The 12-month rolling dividend yield was 8.04%, the last 12 payouts each divided by net asset value on its ex-date and added up.

For 2025, J.P. Morgan's tax notice said 15.86% of ordinary dividends was qualified dividend income, the portion that may be taxed at a lower rate. Ordinary dividends, the notice says, include short-term capital gains. The rest of that year's ordinary dividends did not qualify.