This is an actively managed ETF that invests in dividend-paying technology companies while selling call options to pursue a target distribution yield. It applies a covered call strategy that maintains exposure to dividend-paying tech stocks and supplements income with option premiums.

It suits income-focused investors who want to keep exposure to the technology sector while pursuing a high distribution yield through an options strategy.

The ETF is managed by First Trust using an active management approach.

The fund invests in dividend-paying technology companies and uses a covered call strategy, selling call options on its holdings or on an index to pursue a target distribution yield. In exchange for supplementing income with option premiums, participation in upside is partly limited, as the fund seeks both technology sector exposure and a high distribution.

• Covered calls combined with dividend-paying tech stocks
• Target distributions supported by option premiums

Assets under management (AUM) stand at $655.3M, and the expense ratio is 0.75% per year.

Compared with TDIV and TDV, which invest in dividend-paying tech stocks without an options strategy, the main points of comparison are the covered call strategy and the focus on distributions.

Covered call strategies tend to lag the underlying stocks somewhat in rising markets because of the call options, while in sideways or falling markets option premiums tend to supplement distribution income. Volatility is relatively high because of the concentration in the technology sector.

Fund flows into option income products vary with demand for high distribution yields and with the outlook for the technology sector, and money sometimes moves into related products when interest in income strategies rises. It is also worth noting that performance varies with the direction of tech stocks and the options environment.

Technology sector exposure and a high distribution yield are its strengths, while limited upside in rising markets, sector concentration, and options strategy risk are considerations.

For direct exposure to the technology sector without an options strategy, XLK is one direct alternative, and for a product that applies covered calls to the Nasdaq 100, JEPQ is also a candidate for comparison. For a different approach that adds call options to dividend stocks, DIVO can also be considered. The two funds shown in the table, TDIV and TDV, invest in dividend-paying tech stocks without an options strategy and therefore differ in how they distribute income. What sets this ETF apart is that it combines dividend-paying tech stocks with covered call income.

Here are the points to review before investing in TDVI. The high distribution yield is attractive, but limited upside in rising markets, sector concentration, and options strategy risk should be confirmed in advance. It is also a good idea to compare it with general technology and option income products.

The cap on gains in strong rallies, technology sector concentration, and options strategy risk are the main variables for short-term performance, and the effectiveness of an options strategy can vary with market conditions. A high distribution yield cannot fully offset price declines.

It is a suitable candidate for income-focused investors who want to maintain technology sector exposure while pursuing a high distribution yield. For technology exposure without an options strategy, consider a product such as XLK, and for covered calls combined with dividend-paying tech stocks, compare this fund alongside it before choosing.