Schwab Fundamental U.S. Small Company ETF (FNDA) Covered Calls

The Schwab Fundamental U.S. Small Company ETF is an exchange-traded fund that tracks the Russell RAFI US Small Company Index. This fund provides exposure to small-cap stocks in the United States using a fundamental weighting approach rather than market capitalization. By selecting companies based on adjusted sales, retained operating cash flow, and dividends plus buybacks, the fund seeks to provide a value-oriented alternative to traditional small-cap index investing.

You can sell covered calls on Schwab Fundamental U.S. Small Company 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 FNDA (prices last updated Tue 10:45 AM ET):

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

The Schwab Fundamental U.S. Small Company ETF (FNDA) is an exchange-traded fund that offers a specialized "smart beta" approach to small-cap investing. Unlike traditional funds that weight companies by their market price, FNDA tracks the Russell RAFI US Small Company Index. This index selects and weights its holdings based on three key fundamental measures: adjusted sales, retained operating cash flow, and dividends plus buybacks. This methodology is designed to reduce the risk of overpaying for overvalued stocks while increasing exposure to companies with strong underlying financial performance.

The fund provides broad diversification across nearly one thousand individual holdings, spanning various sectors of the domestic economy. By using five-year averages for its fundamental metrics, the fund aims to provide a more stable and objective measure of a company's size and economic footprint. This long-term perspective helps to minimize the impact of short-term market noise and ensures that the portfolio remains anchored in companies that demonstrate consistent operational results. The result is a portfolio that often has a significant tilt toward the value and quality segments of the small-cap market.

Competitive Landscape

FNDA operates in the highly competitive small-cap ETF market, where it serves as a fundamentally weighted alternative to broad market-cap indices. Its primary competitors include the iShares Russell 2000 ETF, which is the industry benchmark for small-cap performance, and the Vanguard Small-Cap ETF. These funds are primary targets for investors seeking standard small-cap exposure, though they differ from FNDA by using market price as the primary driver for stock weighting.

In the specialized value and smart beta space, the fund competes with the iShares S&P Small-Cap 600 Value ETF and the Vanguard Small-Cap Value ETF. Additionally, First Trust Small Cap Core AlphaDEX Fund offers a different quantitative selection process. These competitors are evaluated based on their expense ratios, tracking error, and the availability of options contracts. While FNDA provides a unique fundamental screen, these peers offer different risk profiles and varying levels of liquidity for options-based strategies.

Strategic Outlook and Innovation

The strategic future of the fund is tied to the continued adoption of non-traditional indexing strategies by institutional and retail investors. As market participants become more aware of the potential pitfalls of market-cap weighting—namely the tendency to overweight potentially overpriced stocks—fundamental indexing is positioned as a core portfolio building block. The fund’s strategy is designed to be evergreen, providing a systematic way to rebalance into undervalued names and trim those that have become expensive relative to their actual business results.

Innovation within the small-cap space involves the use of more granular data to refine the selection of constituents. While the core fundamental metrics remain stable, the company continues to focus on maintaining high liquidity and low transaction costs for its shareholders. By offering a transparent and rules-based approach, the fund aims to provide a reliable tool for investors looking to capture the historical "small-cap premium" without the concentration risks found in actively managed portfolios. This systematic approach ensures that the fund remains relevant across various economic cycles and market regimes.

Want more examples? FND Covered Calls | FNDC Covered Calls