This is a buy-write strategy ETF that holds a portfolio of US stocks while selling call options on the S&P 500 Index, using the option premiums as a source of distributions. It manages the options with staggered (laddered) expirations, and the share of the portfolio covered by call options is adjusted within a set range relative to the portfolio's size.

It suits investors who prioritize generating monthly cash flow over capital gains from holding stocks.

It is an actively managed ETF launched by First Trust in 2014.

On top of the stock portfolio, the fund sells S&P 500 Index call options at or slightly out of the money and collects the premiums. The share of the portfolio covered by call options is adjusted within a set range relative to the total portfolio, and staggering expirations reduces the risk of concentrated market volatility at any single point in time. The options strategy aims to maximize income through derivative contracts.

• A simple, transparent structure using index-level S&P 500 call options
• Active management that flexibly adjusts option exposure

Assets under management (AUM) stand at $2.5B, and the total expense ratio is 0.75% per year.

By the nature of covered call ETFs, upside gains are capped in rising markets, and the fee level is somewhat higher than that of a simple passive ETF. For investors who prefer a monthly distribution structure, however, it offers an advantage in terms of cash flow.

Covered call ETFs as a group tend to see their distribution appeal diminish in high-interest-rate environments, but when volatility expands, option premiums rise, which supports distribution stability. Even during stock market declines, premium income helps cushion part of the drop.

This is a category that has drawn steady inflows, centered on retirement-oriented demand for monthly cash flow. As the market for similar covered call ETFs expands, competition from newer products such as JEPI, JEPQ, and QYLD is intensifying, and investors tend to compare each product's option strategy and distribution stability side by side.

Monthly cash flow and a cushioning effect are its strengths, while limited participation in rallies and a relatively high expense ratio are its weaknesses.

Comparable products in the same covered call category shown in the table include JEPI and JEPQ. JEPI pays monthly distributions through a derivative-based structure built on the S&P 500 and has a large asset base, while JEPQ is built on the Nasdaq 100 and specializes in tech stock exposure. QYLD sells at-the-money call options on the entire Nasdaq 100 position, which produces a high distribution but leaves almost no participation in upside. GPIQ is based on the Nasdaq 100 and GPIX on the S&P 500, both covered call products from the Goldman Sachs family, each with a different option structure. Unlike these, FTHI sells call options on a single index in a staggered, laddered manner.

Here are the points to review before investing in FTHI. It is important to fully understand in advance the limited upside participation that comes with a covered call structure, how option exposure is adjusted, and how distributions change with the volatility environment.

When stock prices rise, upside gains are capped, and when market volatility declines, premium income falls and distributions may shrink. Because the structure includes derivative contracts, it is more complex than a typical equity ETF, and in a rising market its returns can lag significantly behind a simple equity ETF over the same period.

This is a covered call ETF worth considering for investors who value monthly cash flow. It is best used as part of a dividend-focused portfolio after fully understanding its limited participation in rising markets. Compare its fees and strategy with similar products such as JEPI and QYLD to confirm that it fits your own investment goals.