I am building my investment income from three sources: dividends, covered-call ETFs and selling options. They pay on different schedules, carry different risks and are taxed differently in my account. This is how I think about each one and why I want all three.
My Three Income Sources at a Glance
| 1. Dividends | 2. Covered-call ETFs | 3. Selling options | |
|---|---|---|---|
| What it is | Singapore bank stocks, plus some US stocks | Funds that sell call options and pay out the premium | Cash-secured puts and covered calls that I sell myself |
| When it pays | A few times a year | Monthly | When I sell the option |
| What can go wrong | Payouts get cut | The share price falls by more than the payouts | I get assigned at a loss, or a call caps my gain |
1. Dividends
Dividends are where I started. I hold Singapore bank stocks, and they pay a few times a year, so the income arrives in lumps rather than every month. I like that Singapore dividends are not taxed in my hands: IRAS says dividends paid by a Singapore resident company under the one-tier system are generally not taxable (IRAS, Dividends, 27 Oct 2026).
US dividend stocks are different. Singapore has no tax treaty with the US, so US dividends have 30% withholding tax, and US-listed holdings count towards US estate tax once a non-US person holds more than $60,000 of them (IRS). I weigh both before I buy any US-listed payer.
Dividends alone are slow and lumpy, which is why they are only one of my three sources.
2. Covered-Call ETFs
A covered-call ETF holds an asset and sells call options on it. The premium becomes the monthly payout, and in return the fund gives up part of any big rally. This gives me income every month, not a few times a year.
I hold US-domiciled funds such as BTCI, IAUI, IWMI and MLPI, and I also hold an Irish-domiciled options ETF. The US funds have 30% US withholding tax taken from each payout, and they count as US assets for US estate tax above $60,000 (IRS). In my own account, I received the full payouts from my Irish-domiciled options ETFs, with no tax deducted. This is not tax advice.
The trade-off is that a high payout is not the same as a good return. BTCI is my clearest lesson: its payouts have been large, but the fall in bitcoin has outweighed them, and my position is down after tax since I first bought it (How BTCI Performed Since I Bought It). So I judge these funds on total return, not on the payout alone.
3. Selling Options
I sell two kinds of options myself. A cash-secured put pays me a premium for agreeing to buy shares at a set price if I am assigned. A covered call pays me a premium for agreeing to sell shares I already own at a set price.
The premium comes in as soon as I sell, which makes this the most active of my three sources. It is also the one that needs the most attention. I have to decide when to close a trade, what to do if I am assigned, and how much risk I am comfortable taking.
The risks are real. A stock can fall well below my put strike and leave me holding shares that are worth less than I paid. A covered call limits how much of a rise I keep. A premium is not profit until the trade has ended, and shares I am assigned can swing either way after that.
How the Three Fit Together
I want income that does not depend on one thing. Dividends arrive a few times a year, the covered-call ETFs pay monthly, and options premium comes whenever I choose to sell. Each can lose money on the capital underneath it, so I look at what I received after tax, my total return, and the risk I have open in my options.
I still hold CSPX as well. It is an accumulating fund, so it pays me no income and sits outside the three sources.
Related
- How BTCI Performed Since I Bought It
- How IAUI Performed Since I Bought It
- How IWMI Performed Since I Bought It
- How MLPI Performed Since I Bought It
- QQQI vs SPYI – Which NEOS High Income ETF Is Better?
- SPYI vs SPY – Is the Extra Income Worth It?
As always, remember that Past Performance is No Guarantee of Future Results. And none of the content that I write on this site should be taken as financial advice.
