I used to loathe it when the stock market sold off. It meant the value of my portfolio took a hit.

However, I've come to see sell-offs not for the value I've lost but for the buying opportunities I gained. I seek to capitalize on declines by putting some of my available cash to work to add to my favorite positions at lower prices. That strategy has enabled me to generate higher returns when the market eventually rallies.

With the Nasdaq recently slumping more than 10%, I'm taking advantage by adding to my position in the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ -1.72%). The exchange-traded fund (ETF) benefits from the increasing volatility that comes with a slumping stock market.

A Nasdaq-focused strategy

JPMorgan Nasdaq Equity Premium ETF has a straightforward mandate. The fund aims to provide monthly income to investors and exposure to the Nasdaq-100 with less volatility. It does that through a two-pronged strategy:

1. Underlying equity portfolio: The ETF's managers have built an equity portfolio by applying data science to fundamental research. While they primarily invest in Nasdaq-100 stocks, they don't allocate the portfolio to match the index. That can enable them to outperform that index.
2. Disciplined options overlay: The fund's managers write out-of-the-money call options on the Nasdaq-100 to generate income the ETF distributes to investors each month. That is, they short options above the current market price. As an options writer or seller, the fund gets paid a premium -- the value of the option -- at the time of the trade.

The fund's strategy can yield strong total returns. For example, over the past 12 months, its options strategy has generated an income yield of 10.1%. That's significantly higher than other asset classes.

Meanwhile, the equity portfolio has added to the total return. The value of the fund's share price has risen as the stocks it holds have increased. Overall, the ETF has produced a 16.4% return over the past year, just below the Nasdaq-100's 16.6% return.

Cashing in on volatility

The fund's monthly cash distributions are a big driver of its returns. Those payments ebb and flow each month based on the options premium income the fund generates.

Volatility is one of the many factors that affect the price of an option. Periods of high volatility tend to increase the price of an option. That benefits options sellers like the JPMorgan Nasdaq Equity Premium Income ETF because it gets paid more when it sells options in a more volatile period. That means it has historically paid higher cash distributions during and after periods of higher volatility:

JEPQ Dividend data by YCharts

With the Nasdaq slumping and volatility increasing, the fund should be able to generate more options premium income in the near term, and the cash returns from its monthly income payments should be higher.

Meanwhile, the value of the fund is also falling with the Nasdaq. It's down 11.5%, compared with the index's 12.6% decline. So I could potentially earn a higher total return in the future. The fund's value should rise as the Nasdaq rebounds. On top of that, I will continue to collect the lucrative income generated by its options overlay strategy.

The Nasdaq's upside with less volatility, plus income

The Nasdaq's slump has provided me with a compelling opportunity to add to my position in the JPMorgan Nasdaq Equity Premium Income ETF. The ETF should benefit from this volatility by capturing higher options premium income. Meanwhile, the value of the fund should rise when the Nasdaq recovers, which would add to my total returns. The compelling combination of income and upside potential was too good to pass up, which is why I capitalized on the sell-off to add to my position.