This ETF Pays a ~12% Yield Annually, As Long As Markets Don’t Crash

The post This ETF Pays a ~12% Yield Annually, As Long As Markets Don’t Crash appeared first on 24/7 Wall St..

One of the most important concepts investors can learn is tail risk.Tail risk refers to the possibility of an extreme market event that sits far out on the edges, or “tails,” of a probability distribution. Think events like the 2008 financial crisis, the COVID-19 crash in 2020, or the sudden volatility spike during Volmageddon in 2018. These events are uncommon, but when they occur, they can have an outsized impact on portfolios. The interesting thing about tail risk is that there are essentially two ways to profit from it.

The first is to buy protection against it. Think of this like purchasing insurance. You pay ongoing premiums month after month, and most of the time that insurance expires worthless. But when a major market crash occurs, the payoff can be enormous. The problem is that you can spend years bleeding small losses while waiting for the event to happen, if it ever happens at all.

The second approach is to sell that protection. In this scenario, you become the insurance company. You collect premiums month after month as long as nothing bad happens. The income can be very attractive. The catch is that when a major market event does occur, there is suddenly a very long line of people expecting payment from you.

That latter is largely how the Simplify Barrier Income ETF (SBAR) generates its 11.76% distribution rate as of May 31, 2026. Whenever I see a double-digit yield, I always want to understand where it comes from. In SBAR’s case, the strategy is definitely risky, but it’s also more sophisticated and differentiated than the typical covered call, mortgage REIT, or high-yield bond fund.

What Is SBAR?

SBAR generates income primarily by selling something known as barrier put options. A barrier put option functions similarly to a traditional put option, except it only becomes active if a specified price barrier is breached. In SBAR’s case, the strategy revolves around a 30% downside barrier tied to three major U.S. equity benchmarks: the S&P 500, Nasdaq-100, and Russell 2000.

The structure is based on the worst-performing of those three indices. As long as the worst-performing index remains above the 30% downside barrier at expiration, investors keep the premiums collected from selling the options and generally avoid losses from the barrier structure itself. If the barrier is breached and the worst-performing index finishes below that threshold at expiration, investors begin participating in the downside losses beyond the barrier level.

The options are marked to market throughout their life, meaning SBAR’s net asset value can fluctuate along the way. To reduce timing risk, SBAR ladders multiple barrier options across different maturities. As contracts expire, they are rolled into new positions.  However, the ultimate outcome depends on where the indices finish relative to the barrier at expiration.

There is another wrinkle. These options contain an autocall feature. If the position generates a positive return over a monthly period, the counterparty can call the position away and initiate a new contract. This effectively limits some upside participation, creating a trade-off where investors exchange part of their upside potential for consistent premium income.

In effect, you’re selling both left-tail and right-tail risk. You give up some upside through the autocall feature and accept downside exposure below the 30% barrier. Historically, markets have certainly fallen more than 30%. But within any given year, such declines remain relatively uncommon. That probability gap is what generates the premium SBAR seeks to collect.

Is SBAR a Good Investment?

I think SBAR occupies an interesting middle ground between stocks, bonds, and alternative income vehicles such as business development companies, mortgage REITs, and covered call ETFs. The key attraction is that it derives its returns from a different source. Traditional bonds earn interest. Dividend stocks earn corporate profits. Covered call ETFs sell upside participation. SBAR primarily earns income by harvesting volatility and tail-risk premiums. That diversification can be valuable.

So far, the results have been fairly encouraging. From April 15, 2025 through June 18, 2026, a period of roughly 1.17 years, SBAR generated a 14.44% annualized return while experiencing just 9.81% annualized volatility, according to testfolio.io. Even during the market turbulence surrounding the U.S.-Iran conflict in 2026, SBAR’s maximum drawdown was only 5.32%.

Of course, the risk remains. If the worst-performing index among the S&P 500, Nasdaq-100, and Russell 2000 falls beyond the barrier and finishes below it at expiration, investors begin participating in those losses. The premiums collected help cushion the blow, but they do not eliminate it. That means investors cannot simply watch the S&P 500 and assume everything is fine. The strategy depends on three separate equity benchmarks, and the weakest performer determines the outcome.

Still, if you’re comfortable with that trade-off, SBAR has some appealing qualities. The ETF currently offers an 11.76% distribution rate paid monthly. It provides exposure to a differentiated source of income. And unlike many covered call strategies targeting similar yields, it does not systematically cap upside participation every month through option overwriting.

At a 0.75% expense ratio, it’s also significantly more accessible than trying to source and manage these structured products independently. Just remember what you’re getting paid for. The income is attractive because you’re acting as the insurer. Most of the time, that works out well. The challenge comes when the claim finally arrives.

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