First Trust Materials AlphaDEX Fund (FXZ) Covered Calls

The First Trust Materials AlphaDEX Fund is an exchange-traded fund that provides exposure to the U.S. materials sector using a quantitative "AlphaDEX" selection methodology. It seeks to outperform traditional cap-weighted benchmarks by ranking and weighting stocks based on growth and value factors like price appreciation, sales growth, and book value.

You can sell covered calls on First Trust Materials 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 FXZ (prices last updated Mon 4:16 PM ET):

Want to make money with covered calls?  Sign Up For A Free Trial

Core Business and Products

The First Trust Materials AlphaDEX Fund (FXZ) is a sector-specific ETF that utilizes the proprietary AlphaDEX selection methodology to track the StrataQuant Materials Index. Unlike traditional ETFs that weight companies by market capitalization, FXZ employs a multi-factor ranking system. It evaluates stocks from the Russell 1000 Index based on growth factors (such as 3, 6, and 12-month price appreciation) and value factors (such as cash flow to price and book value to price).

The fund’s "product" is its tactical, enhanced-indexing approach to the basic materials sector. Its holdings include key players in the chemicals, metals, mining, and paper industries, such as CF Industries, Mosaic, Alcoa, and Newmont. By equally weighting stocks within tiered quintiles based on their factor scores, the fund reduces concentration risk in mega-cap names and provides greater exposure to mid-cap companies that may offer higher alpha potential.

Competitive Landscape

FXZ operates in a crowded sector but distinguishes itself through its non-cap-weighted structure. It competes primarily with both broad-market materials funds and other factor-based vehicles. Primary competitors include:

1. Materials Select Sector SPDR Fund: The liquid industry benchmark that tracks large-cap U.S. materials stocks using traditional market-cap weighting.

2. iShares U.S. Basic Materials ETF: A broad competitor providing exposure to the full range of domestic materials companies.

3. Vanguard Materials ETF: A low-cost alternative that captures the performance of the MSCI US Investable Market Materials Index.

4. Invesco Dorsey Wright Basic Materials Momentum ETF: A direct factor-competitor that selects stocks based specifically on price momentum rather than the multi-factor AlphaDEX approach.

5. iShares Global Materials ETF: Competes for capital from investors seeking materials exposure that includes significant international holdings.

Strategic Outlook and Innovation

The strategic appeal of FXZ is rooted in the "cyclical rotation" theme. As an AlphaDEX fund, it is designed to capitalize on inefficiencies in the materials market by tilting toward stocks with the strongest fundamental and technical profiles. In 2026, this approach is particularly relevant as global infrastructure spending and the green energy transition drive demand for lithium, copper, and specialized chemicals. The fund’s quarterly rebalancing ensures that it remains dynamic, shedding laggards and adding companies that show improving value or growth metrics.

Innovation for the fund is centered on the continuous refinement of its quantitative model. By providing a "middle ground" between active management and passive indexing, FXZ offers a disciplined way to access the materials sector without the high fees of traditional mutual funds. For sophisticated investors, FXZ is a highly liquid and optionable tool, making it ideal for income-generation strategies such as covered call writing, which can help mitigate the inherent volatility of the underlying commodity-sensitive stocks.

Want more examples? FXY Covered Calls | FYC Covered Calls