Invesco S&P SmallCap Momentum ETF (XSMO) Covered Calls

The Invesco S&P SmallCap Momentum ETF (XSMO) is a specialized exchange-traded fund designed to capture the performance of small-cap U.S. stocks exhibiting strong price momentum. By tracking the S&P SmallCap 600 Momentum Index, the fund targets companies that have demonstrated sustained upward price trends relative to their peers. XSMO offers investors a systematic way to participate in the growth potential of the small-cap segment while utilizing a proven factor-based investment approach.

You can sell covered calls on Invesco S&P SmallCap Momentum ETF to lower risk and earn monthly income. Born To Sell's covered call screener gives you customized search capabilities across all possible covered calls but here are a couple of examples for XSMO (prices last updated Thu 9:40 AM ET):

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Invesco S&P SmallCap Momentum ETF (XSMO) provides targeted exposure to a dynamic slice of the U.S. equity market. The fund is built on the academic principle of momentum investing—the tendency for stocks that have outperformed recently to continue doing so in the near term. XSMO draws its constituents from the S&P SmallCap 600, a benchmark known for its strict profitability requirements, ensuring that the momentum being tracked is rooted in high-quality, viable businesses.

Core Strategy and Allocation

The fund selection methodology is purely rules-based. It identifies the top 120 stocks in the S&P SmallCap 600 with the highest "momentum scores," which are calculated based on their price performance over the prior 12 months (excluding the most recent month). As of April 2026, the fund is heavily concentrated in the Industrials and Health Care sectors, reflecting the strong relative strength in these areas. Key holdings currently include Viavi Solutions (VIAV), Viasat (VSAT), and Sanmina (SANM). The fund is rebalanced semi-annually in June and December to ensure it remains aligned with the latest market trends.

Competitive Landscape

1. iShares Core S&P Small-Cap ETF is the primary benchmark and most liquid options vehicle for the S&P 600, offering a massive open interest for covered call writers.
2. Invesco Dorsey Wright SmallCap Momentum ETF uses a "Relative Strength" methodology to select small-cap winners, representing a direct competitor in the factor-based momentum space.
3. SPDR Portfolio S&P 600 Small Cap ETF is the low-cost, modernized alternative to SLY, offering an active options market for investors tracking the S&P 600 benchmark.
4. iShares Russell 2000 ETF is the most liquid small-cap benchmark overall; while it follows a different index (Russell 2000), it is the primary rival for institutional small-cap capital.
5. Invesco S&P SmallCap Health Care ETF competes for sector-specific momentum seekers, as Health Care often represents a significant weighting within XSMO strategy.

Strategic Outlook and Innovation

The strategic focus for XSMO in 2026 is bolstered by a "broadening out" of the U.S. equity bull market. Analysts in 2026 have noted that as the "Magnificent 7" trade matures, capital is rotating aggressively into high-quality small caps that benefit from 2026 fiscal initiatives. XSMO is currently positioned to capture this rotation, as its momentum-focused model naturally tilts toward the cyclicals and industrials that are leading the current market phase. With an expense ratio of 0.36%, the fund remains one of the most efficient vehicles for capturing small-cap price persistence.

Innovation within the fund is tied to the evolution of the S&P Factor Indices. In 2026, the index methodology has been enhanced with sophisticated "risk-balancing" filters that aim to mitigate the volatility spikes typically associated with momentum strategies. By utilizing "Intraday NAV" tracking (XSMOIV), institutional traders can now execute large blocks with greater precision, providing the fund with the liquidity necessary to handle the increased inflows seen in early 2026. This combination of disciplined factor selection and modern liquidity tools ensures XSMO remains a staple for investors seeking to outperform traditional small-cap benchmarks through systematic trend-following.

Want more examples? XSLV Covered Calls | XSOE Covered Calls