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FTQI uses a buy-write strategy on the NASDAQ-100, targeting a high yield of 12% with monthly payouts. This approach includes selling call options on all its assets, which limits potential gains and is ideal for investors looking for income. As a result, the fund has not performed as well as the NASDAQ-100, achieving a 76% return over 10 years, while the index has gained 436%.
First Trust Nasdaq BuyWrite Income ETF holds stocks of the Nasdaq Composite, and sells call options on the Nasdaq 100 index for income. FTQI has lagged some competitors on various time frames. The option strategy or distribution policy changed in 2022 to pay a higher yield, making historical data useless to evaluate FTQI.
This article examines the First Trust Nasdaq BuyWrite Income ETF and suggests that it may not be the best choice for investors looking to benefit from growth in Nasdaq stocks. The fund focuses on generating income by using a covered-call strategy on the Nasdaq-100 Index, but it primarily uses in-the-money call options. This strategy can limit potential price appreciation that growth stocks typically aim for, as in-the-money options restrict this growth.
First Trust Nasdaq BuyWrite Income ETF combines a stock portfolio with an index option overlay to generate additional cash flow. The buy-write strategy offers partial hedging against price declines and improved returns in flat or slightly bullish markets. FTQI's top holdings include Apple, Microsoft, Amazon, Meta Platforms, and Nvidia, with a diverse sector composition.
First Trust Nasdaq BuyWrite Income ETF is an actively managed fund that holds a portfolio of 157 stocks and writes call options on the Nasdaq 100 index. The FTQI ETF has a 12-month distribution yield of 11.96% and an expense ratio of 0.85%. Compared to its closest competitor, FTQI has lagged behind in performance but has shown improvement in the last 12 months due to a change in strategy.
The FTQI ETF uses a proprietary quantitative method to select U.S. large cap stocks, while adding a call-writing overlay to generate income. Compared to peer funds that employ a buy-write strategy on the Nasdaq 100 Index, the FTQI is the most expensive yet delivers the worst short- and long-term performance. For investors seeking exposure to growth stocks, while generating income from call-writing, I suggest they consider the JEPQ ETF or the QYLG ETF instead.
First Trust Nasdaq BuyWrite Income ETF holds 150 stocks of the Nasdaq Composite and sells calls on the Nasdaq 100 to generate income. The fund has lagged its competitors since inception.
FAQ
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