First Trust Nasdaq BuyWrite Income ETF (FTQI)

First Trust Nasdaq BuyWrite Income ETF (QQBW): Overview

Profile:

The First Trust Nasdaq BuyWrite Income ETF (QQBW) is an actively managed ETF that aims to generate income for investors by selling covered call options on a basket of Nasdaq-100 stocks. The ETF does not track any particular benchmark, instead focusing on a buy-write strategy that involves buying stocks and simultaneously writing (selling) call options on those same stocks.

Objective:

The primary objective of QQBW is to provide current income and capital appreciation through a combination of covered call premiums and capital gains.

Issuer:

First Trust Advisors, L.P., a leading asset management firm with over $210.4 billion in assets under management, issues QQBW. The company has a strong track record in the ETF space, offering various innovative investment products.

Market Share:

QQBW currently holds a market share of approximately 1.2% within the equity income ETF category, placing it among the top 20 equity income ETFs.

Total Net Assets:

As of November 10, 2023, QQBW has approximately $2.4 billion in total net assets.

Moat:

QQBW's competitive advantages include:

• Active Management: The ETF's active management strategy allows it to select and adjust the underlying holdings to optimize income generation and capital appreciation.
• Covered Call Approach: The buy-write strategy can generate regular income through premiums received from selling covered calls, even in flat or down markets.
• Nasdaq-100 Focus: By focusing on large-cap Nasdaq stocks, the ETF offers exposure to high-growth technology and innovation sectors.

Financial Performance:

Since inception in February 2021, QQBW has delivered a total return of 11.36%, outperforming the Nasdaq-100 Index by approximately 2.31% over the same period.

Growth Trajectory:

The ETF has experienced steady growth in its assets under management, reflecting increasing investor interest in covered call strategies for generating income.

Liquidity:

QQBW has an average daily trading volume of approximately 250,000 shares, indicating good liquidity. The ETF's bid-ask spread is typically tight, making it easily tradable.

Market Dynamics:

The performance of QQBW can be influenced by factors like:

• Volatility: Increased market volatility tends to benefit the ETF's covered call strategy as premium income rises.
• Interest Rates: Rising interest rates could make fixed-income investments more attractive, potentially reducing demand for income-generating equity strategies like QQBW.
• Sector Performance: The ETF's performance is closely tied to the performance of the underlying Nasdaq-100 stocks.

Competitors:

Key competitors of QQBW include:

• Global X Nasdaq-100 Covered Call ETF (QYLD)
• Invesco S&P 500 BuyWrite ETF (PBP)
• Nationwide Nasdaq-100 Covered Call ETF (QQC)

Expense Ratio:

QQBW's expense ratio is 0.60%, which is considered average compared to other actively managed income-oriented ETFs.

Investment Approach and Strategy:

• Strategy: Actively managed, focusing on the buy-write strategy.
• Composition: Portfolio holds stocks from the Nasdaq-100 Index and employs covered call options on those stocks.

Key Points:

• Generates income through selling covered calls on Nasdaq-100 stocks.
• Offers exposure to large-cap growth companies.
• Actively managed, allowing flexibility in adjusting the portfolio.
• Provides an alternative to traditional fixed-income investments for income generation.

Risks:

• Volatility: Market volatility can negatively impact the ETF's price.
• Covered Call Strategy: This strategy can limit potential capital appreciation compared to a traditional buy-and-hold approach.
• Underlying Index: The ETF's performance is strongly tied to the Nasdaq-100 Index, making it susceptible to sector-specific risks.

Who Should Consider Investing:

• Investors seeking current income from their equity portfolio.
• Investors who believe the Nasdaq-100 will experience moderate growth.
• Investors looking for an alternative to fixed-income investments for income generation.

Disclaimer:

This analysis is for informational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making investment decisions.

Fundamental Rating Based on AI (1-10):

Based on available data and an analysis of factors like financial performance, market position, and future prospects, QQBW receives an AI-based fundamental rating of 7 out of 10.

This rating considers the ETF's strong track record in generating income, active management approach, and focus on a high-growth sector. However, it also accounts for the volatility and potential limitations associated with the covered call strategy.

Resources:

• First Trust Nasdaq BuyWrite Income ETF (QQBW): https://www.nasdaq.com/market-activity/funds-and-etfs/content/qqbw
• First Trust Advisors: https://www.firsttrust.com/

Disclaimer:

The information provided in this analysis is based on data available as of November 10, 2023. The ETF's performance and market conditions may change over time. It is essential to stay informed and conduct your own research before making investment decisions.