Mega-cap technology names have powered much of the market's gains over the past decade, and in recent years many of these stocks have climbed even higher amid the AI-driven boom. Apple (AAPL), Amazon (AMZN), Google (GOOGL), Meta (META), Microsoft (MSFT), Micron Technology (MU), Nvidia (NVDA), Palantir (PLTR) and Tesla (TSLA) have each delivered outsized returns since 2020. These companies either do not pay dividends or are low dividend yielders. For investors who want to hold these popular growth-focused stocks but also want to generate income, Cboe Single Stock Defined Income Indices (AAPLDI, AMZNDI, GOOGLDI, METADI, MUDI, NVDADI, PLTRDI, TSLADI), are designed to achieve this by providing a 20% annualized premium yield without giving up too much of the upside.
How it Works
Each index in the series aims to achieve the following investment objectives:
- Providing exposure to the underlying mega-cap tech equity through a long position in the stock
- Capitalizing on high implied volatility embedded in the options market via a short position in weekly out-of-the-money (OTM) calls on the underlying stock
- Generating consistent income by dynamically selecting a strike price to target a 20% annualized premium yield
A daily Delta hedge is also implemented to offset the Delta risk from the short call position.
Cboe Single Stock Defined Income Indices share that basic structure a typical covered call benchmark like the Cboe S&P 500 BuyWrite Index (BXM) but adopt a much more sophisticated design.
Source: Cboe
Performance and Metrics from January 2020 – June 2026
The performance and key metrics of all nine Single Stock Defined Income Indices are compared to their respective stock returns from January 2020 to June 2026 below.
Source: Cboe
The cumulative premium income yield averaged across the nine stocks (resetting each year) is shown below, demonstrating the effectiveness of the yield targeting mechanism.
Source: Cboe
Source: Cboe
*Annualized Premium Yield is a simple average yield where all inception call premiums, net of cost, are averaged and multiplied by 52
On average, Cboe Single Stock Defined Income Indices gave up approximately 4% of annualized return versus their underlying stocks, which is a modest cost for capturing a steady income stream of approximately 20% annualized premium yield.
Dynamic Strike Selection to Achieve 20% Premium Yield
The weekly call option in each Defined Income Index is struck out-of-the-money, with the exact strike price chosen dynamically each week to hit the 20% annualized yield target. The strike moves with market conditions where richer option premiums (typically in higher-volatility stocks or periods) enable the strategy to sell calls further out-of-the-money and still collect the same targeted income.
The table below shows the average strike percentage each year.
Source: Cboe
Higher volatility names like PLTR and TSLA have the richest options premiums and can hit the 20% yield target while selling calls further out-of-the-money (110%+ of spot, on average). . This allows for further participation in the stock’s upside gain before the cap is hit. This mechanism allows each index to generate a steady income stream even as market conditions and volatility shift.
Cboe Single Stock Defined Income Indices are designed for investors seeking exposure to companies at the forefront of cutting-edge technology while also targeting a steady income stream. As an alternative exposure to these mega-tech stocks, these covered call strategies generate a steady income from rich option risk premium without sacrificing substantial upside potential.
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