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State Street ETF Turns Tech Volatility Into Income

BY | ETF Database
08/24/2026 | 16 VIEWS
A wave of anxiety over AI infrastructure spending pushed technology stocks into a stretch of volatility in late 2025 and early 2026. One exchange-traded fund converted that turbulence into cash instead of losses.Key Takeaways: XLKI fell just 3.8% during a tech selloff that dragged the sector down 13.3%. The fund’s options strategy pushed its dividend yield to 19.7%, versus 0.4% for the sector. Selling call options caps some gains, but XLKI still captures about 70% of sector moves. The drawdown reflected investor concern over heavy AI infrastructure spending by technology companies. Investors also worried AI could disrupt existing software business models, according to the report. According to State Street Investment Management, the State Street Technology Select Sector SPDR Premium Income ETF (XLKI ) fell just 3.8% during the pullback. That compares with a 13.3% drop in the S&P 500 Technology sector, cushioned by high options premiums the fund collected. XLKI, which launched in July 2025, holds the same stocks as the State Street Technology Select Sector SPDR ETF (XLK A). But it adds a twist: The fund sells call options, contracts that generate upfront cash. In exchange, XLKI caps some of the gains on the shares those options cover, according to the fund’s factsheet. See more: Sector ETFs Post Record $25B Inflow as Tech Leads That options income has pushed XLKI’s dividend yield to 19.7%, compared with a 0.4% yield for XLK, according to State Street.Turning Volatility Into Options IncomeThe fund adjusts which options it sells using a measure called delta. Delta estimates the probability that a stock will rise above a set price by a certain date, the report explained. That approach lets the strategy shift as market conditions change, rather than locking into one fixed target. Options premiums have historically supplied more than 80% of the dividend yield across State Street’s suite of 11 sector-based premium income ETFs. Average distribution yields across the suite have landed in the mid-teens, the report found. The fund is designed to let advisors add income to portfolios that are heavy on tech-sector growth but light on yield. It replaces a portion of traditional exposure without fully giving up the sector’s upside, State Street said. XLKI, like the rest of the SSPI lineup, carries a beta of about 0.7 to its underlying sector. That means it still captures roughly 70% of the sector’s price moves, the report said. That participation comes with a cap. As AI spending fueled a tech rally this year, XLKI’s return since inception has trailed its underlying sector by 11.9%. For more news, information, and analysis, visit our Sector Investing Content Hub.

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