September Is Historically the Worst Month for Stocks and These 3 ETFs Pay Up to 9 Percent While You Wait It Out

David Beren

Tue, August 18, 2026 at 3:49 PM GMT+3 6 min read

Quick Read

BALI and DIVO use options overlays on large-cap portfolios to generate up to 9% yields during September's historically weak stretch for stocks.
The S&P 500 averages negative September returns since 1928, and this year's VIX spike to 31 directly boosted premiums for call-writing income funds.
JAAA holds AAA CLO tranches with an equity beta of 0.03, paying roughly 5% in floating-rate yield with near-zero sensitivity to stock market moves.
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September has an unusually poor reputation on Wall Street, with the S&P 500 posting an average negative return for the month going back to 1928. With the VIX near 16 and the index up roughly 13% year to date, income investors are looking at three actively managed funds that keep the cash coming while equities work through the calendar's weakest stretch: iShares U.S. Large Cap Premium Income Active ETF (CBOE:BALI), Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO), and Janus Henderson AAA CLO ETF (NYSEARCA:JAAA).

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Each fund pulls income from a different lever. BALI writes options on large-cap equity exposure. DIVO layers tactical call writing on top of a dividend growth portfolio. JAAA sits entirely outside equities in floating-rate AAA collateralized loan obligation tranches. Distributions on the equity funds have run into the high-single-digit range, while the CLO fund offers a lower rate with a very different risk profile.

Why September Matters for Income Timing

The seasonal pattern is well documented, though it is not deterministic. Last September actually finished green, with the S&P 500 gaining about 4% last September. What has been reliable across decades is elevated dispersion and drawdown risk in the month, which is what income overlays are built to monetize. Higher realized and implied volatility raises the premium call writers collect, and floating-rate coupons reset off short-term reference rates, which currently sit around 3.9% at the three-month point of the Treasury curve.

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The VIX has already flashed warning signs this year, spiking to 31 in late March and again to above 20 in late July. Each spike normalized quickly. For funds that sell volatility as an income source, those episodes translate directly into higher option premiums during the collection window.

BALI: Premium Income on a Tech-Heavy Large-Cap Core

The newest of the three and the most aggressive equity story is BALI. The fund holds a large-cap portfolio anchored by mega-cap technology, with disclosed weightings of NVIDIA at 7.2%, Apple at 5.8%, and Microsoft at 5.7%, and layers a derivative income overlay to convert some of that upside into cash distributions.

The mechanism matters here because BALI writes options rather than owning a fixed-coupon security, so its monthly payout floats with market volatility. That shows up in the payment record: 2026 distributions have swung between $0.179 and $0.346 per share, and the trailing 12-month payout sits at $2.66 per share. At a share price of around $35, that trailing figure implies a yield in the mid- to high-single digits, though what a September buyer collects depends on the volatility environment during the collection window.

Total returns have kept pace with the underlying market. BALI is up about 16% year-to-date and 23% over the trailing year. The tradeoff is concentration. A drawdown in the top three technology names would hit the fund's NAV harder than a broader dividend index, and the 0.69% expense ratio is the highest of the three funds discussed here.

DIVO: A Dividend Core With Tactical Call Writing

A milder approach is taken by DIVO. The fund owns roughly two dozen large-cap dividend payers and writes covered calls on only a portion of the book when the portfolio manager judges the premium worth capturing. That selective overlay is the key distinction from mechanical buy-write funds that sell calls on the entire portfolio every month.

The portfolio is concentrated but recognizable, with top holdings anchored by mega-cap names across technology, financials, and energy, and the top 10 accounting for a majority of assets. Monthly distributions in 2026 have clustered in a tight $0.18-$0.19 range, and December 2025 included a special distribution that pushed the trailing yield to roughly 8%. Excluding that special, the base monthly cadence points to a yield closer to the mid-single digits.

The equity beta of 0.65 is meaningful. DIVO is designed to lag in strong bull tapes and cushion in drawdowns, and the 11% year-to-date total return against the S&P 500's 13% is consistent with that profile. At $5.2 billion in net assets and a 0.56% expense ratio, it is the middle option in cost and equity sensitivity.

JAAA: Floating-Rate Credit With Almost No Equity Beta

The contrarian pick on this list and the one that behaves least like a stock is JAAA. The fund invests in AAA-rated tranches of collateralized loan obligations, the senior slice of securitizations backed by pools of broadly syndicated leveraged loans. Top positions include OCP CLO Ltd at 1.04%, Octagon Investment Partners 51 at 1.01%, KKR CLO 35 at 1.01%, and Ares LIII CLO at 0.98%, spread across major CLO managers.

Two structural features make this fund a distinct September holding. First, coupons reset off short-term rates, so with the front end of the Treasury curve near 4%, the income base stays elevated as long as the Fed keeps policy tight. Second, AAA CLO tranches sit at the top of the capital structure and have had effectively zero historical default experience, giving the fund an equity beta of 0.03. When September volatility hits, JAAA's NAV rarely moves in sympathy.

The trailing yield is around 5%, lower than the two equity income funds, and monthly distributions have drifted from an average of $0.27 in 2024 to about $0.20 in 2026 as short rates have eased. The 0.20% expense ratio is the lowest of the three. The main risk is not credit risk but liquidity risk: CLO tranches can widen sharply during stress episodes, even when defaults never materialize.

Matching Each Fund to a Different Income Objective

The three funds serve different investors. BALI suits someone who wants full equity participation in mega-cap technology with an option overlay layered on top, and accepts variable monthly payouts as the cost. DIVO fits an investor seeking a lower-beta dividend-equity core with a modest call-writing kicker and predictable monthly cash flows. JAAA is the ballast holding, appropriate for an investor whose primary goal is drawing income while insulating principal from any equity drawdown that September might deliver. Combining the three, weighted by equity tolerance, is one way to translate the seasonal thesis into a portfolio.