This ETF is based on the S&P 500 Dividend Aristocrats index. It writes partial covered calls on each component stock every month, targeting income that combines dividend payments with option premiums.

It suits investors who want the stability of Dividend Aristocrat companies but also want higher income than the S&P 500 dividend yield.

Launched by First Trust in 2018, it is a passively managed ETF that tracks an index.

The fund holds S&P 500 Dividend Aristocrat stocks, companies that have raised their dividends for 25 or more consecutive years, and writes a partial covered call on each stock every month. The call option strike price is set as close as possible to the stock's current price. Because options are applied to only a portion of the total position, the fund preserves some upside participation.

• Individual covered calls applied to every Dividend Aristocrat holding (at the single-stock level, not the index level)
• Monthly dividend structure provides stable cash flow

Assets under management (AUM) stand at $3.4B, and the expense ratio is 0.74% per year.

Given the nature of covered call strategies, fees tend to be higher than those of plain dividend ETFs. It is important to understand the trade-off between the capped upside from selling call options and the income it generates.

The stable dividend profile of Dividend Aristocrat stocks combined with option premiums has delivered steady monthly income. In strong equity markets, however, the upside cap from covered call writing can leave total returns below those of pure dividend ETFs.

When a high interest rate environment eases, money tends to flow into high dividend and income ETFs. KNG, which pursues the reliability of Dividend Aristocrats together with covered call income, has drawn attention from income focused investors.

Its strength is a structure that combines the stability of Dividend Aristocrat stocks with covered call income. Its weaknesses are limited upside participation and relatively high fees.

VIG, SCHD and VYM, shown in the table, are direct comparisons that pursue dividend growth or high dividends without covered calls. They carry lower fees and offer full upside participation in bull markets. DFAC is a broad ETF based on a dividend factor, and DVY is an ETF concentrated in high dividend stocks. To explore covered call income strategies further, you can also consider NOBL (a pure Dividend Aristocrat tracker with no covered calls), XYLD (S&P 500 covered call) and DIVO (an actively managed covered call dividend ETF).

Here are the key points to review before investing in KNG. It is important to fully understand the income target, the trade-off of the covered call structure, the fee level and the currency exposure before investing.

The upside cap from selling covered calls is the key drawback in bull markets. If Dividend Aristocrat stocks cut dividends broadly or the market falls, both income and principal can be affected, and the high fees weigh on long term compounding.

This structure suits investors who want to boost monthly income through covered calls on a portfolio of stable, dividend reliable Aristocrat stocks. KNG, designed around income, fits investors who value monthly cash flow. If you want a balance of growth and dividends, VIG and SCHD, which use no covered calls, may be a better fit.