First Trust Utilities AlphaDEX Fund (FXU) Covered Calls

The First Trust Utilities AlphaDEX Fund (FXU) is a smart-beta ETF that tracks the StrataQuant Utilities Index. Unlike traditional market-cap-weighted utility funds, FXU utilizes a proprietary AlphaDEX methodology that ranks stocks based on both growth and value factors. This systematic approach selects a basket of utility companies that demonstrate strong fundamental metrics, aiming to outperform the broader utility sector while maintaining the defensive characteristics of the industry.

You can sell covered calls on First Trust Utilities AlphaDEX Fund to lower risk and earn monthly income. Born To Sell's covered call screener gives you customized search capabilities across all possible covered calls but here are a couple of examples for FXU (prices last updated Mon 4:16 PM ET):

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The First Trust Utilities AlphaDEX Fund (FXU) offers a quantitative twist on traditional sector investing. By screening utility stocks for growth factors—such as price appreciation and sales growth—as well as value factors—like book value and cash flow—the fund creates a portfolio that is more fundamentally driven than standard sector products. This is particularly relevant in the utility industry, which is often criticized for being dominated by slow-growth, debt-heavy incumbents.

Investors utilize FXU to maintain exposure to the defensive nature of utility stocks, which are known for their reliable dividends and regulated rate bases, while simultaneously seeking a performance edge through a systematic, factor-based selection process. The fund’s rebalancing schedule ensures that the portfolio remains anchored to companies that continue to meet these rigorous quantitative standards, shifting away from those that fail to show fundamental improvement.

Competitive Landscape

FXU competes in the utility sector by emphasizing its "AlphaDEX" methodology over passive index replication. Key differentiators include:

1. Factor-Based Selection: By filtering for growth and value, FXU targets high-quality utility firms, whereas standard funds include every company in the index regardless of fundamental health.
2. Risk-Adjusted Potential: The methodology helps mitigate the impact of highly leveraged or stagnant utility companies, focusing instead on those with more robust financial profiles.
3. Peer Alternatives: FXU competes with widely liquid, optionable utility benchmarks such as the Utilities Select Sector SPDR Fund and the Vanguard Utilities ETF.

Market Positioning and Future Trends

Utilities are currently transitioning toward modernized infrastructure, including smart-grid technology and renewable energy integration. As these firms invest heavily in capital expenditure to meet environmental mandates and reliability standards, the fundamental metrics targeted by the AlphaDEX methodology are becoming increasingly important for evaluating long-term company health.

The roadmap for this strategy rests on the belief that a rules-based, multi-factor approach can identify superior utility companies that may be overlooked by broader, capitalization-weighted indices. With a transparent, quantitative mandate, FXU serves as a precise instrument for those aiming to systematically capture the defensive yield and growth potential of the evolving U.S. utility landscape.

Want more examples? FXR Covered Calls | FXY Covered Calls