First Trust Multi Cap Growth AlphaDEX Fund (FAD) Covered Calls

The First Trust Multi-Asset Diversified Income Index Fund is an exchange-traded fund designed to provide high current income and the potential for capital appreciation. The fund tracks an index that allocates across multiple asset classes, including dividend-paying equities, real estate investment trusts, preferred securities, master limited partnerships, and a corporate bond exchange-traded fund. It offers a single-ticker solution for investors seeking a diversified yield-oriented portfolio.

You can sell covered calls on First Trust Multi Cap Growth AlphaDEX Fund 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 FAD (prices last updated Wed 1:00 PM ET):

Want to make money with covered calls?  Sign Up For A Free Trial

Core Business and Products

The First Trust Multi-Asset Diversified Income Index Fund (FAD) is a hybrid investment vehicle that seeks to provide high monthly income by diversifying across five distinct income-producing asset classes. The fund follows a rules-based methodology to select constituents for its portfolio, which includes 100 to 125 individual securities. By blending different types of financial instruments, the fund aims to reduce the volatility associated with any single yield-producing sector while maintaining a competitive overall distribution rate.

The fund’s "multi-asset" strategy involves a specific weighting across its target segments. It typically allocates a significant portion to high-dividend-paying common stocks and Real Estate Investment Trusts (REITs). The remainder of the portfolio is invested in Preferred Securities, Master Limited Partnerships (MLPs) involved in the energy infrastructure space, and a selection of high-yield corporate debt. This broad approach allows investors to capture income from various sources, including corporate profits, real estate rents, and energy transportation fees.

Competitive Landscape

In the "income-seeker" segment of the ETF market, FAD competes with both single-asset income funds and other multi-asset hybrid products. The fund differentiates itself by its strictly defined allocation across diverse high-yield sectors. Primary competitors include:

1. iShares Morningstar Multi-Asset Income ETF: A broad-based competitor that also seeks high income through a diversified mix of bonds, stocks, and alternative assets.

2. Global X SuperDividend ETF: Targets 100 of the highest dividend-yielding equity securities in the world, competing for investors focused purely on yield.

3. iShares Preferred & Income Securities ETF: A specialized competitor that focuses exclusively on the preferred stock market, often used by the same demographic of yield-focused investors.

4. ALPS Alerian MLP ETF: A major player in the energy infrastructure space that competes specifically for the MLP-focused portion of an income investor's portfolio.

5. Vanguard Real Estate ETF: The benchmark for REIT investing, which competes with the real estate allocation within FAD’s multi-asset structure.

Strategic Outlook and Innovation

The strategy of the fund is evergreen in its focus on the "yield gap"—the difference between the income provided by these diverse assets and traditional government bonds. As the global population ages and the demand for retirement income grows, the fund serves as a tactical tool for building a resilient income stream. The innovation lies in the automated, quarterly rebalancing process that forces the fund to "sell high" on overvalued assets and "buy low" on sectors that have seen their yields become more attractive relative to their prices.

Looking ahead, the fund is positioned to navigate various interest rate environments by shifting its internal weightings across assets that react differently to inflation and monetary policy. For example, MLPs and REITs often provide some level of inflation protection, while preferred securities behave more like fixed-income instruments. By providing this "all-in-one" exposure in an optionable format, the fund allows investors to implement sophisticated income-overlay strategies, such as writing covered calls, to further enhance the total return potential of their yield-oriented holdings.

Want more examples? FAB Covered Calls | FAF Covered Calls