First Trust Small Cap Core AlphaDEX Fund (FYX) Covered Calls

The First Trust Small Cap Core AlphaDEX Fund is an investment fund that tracks the Nasdaq AlphaDEX Small Cap Core Index. It employs a rules-based, quantitative methodology that selects stocks from the Nasdaq US Small Cap Index based on growth and value factors. The fund aims to generate alpha by over-weighting stocks with higher fundamental rankings compared to traditional cap-weighted indices.

You can sell covered calls on First Trust Small Cap Core 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 FYX (prices last updated Mon 4:16 PM ET):

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The First Trust Small Cap Core AlphaDEX Fund (FYX) functions as a smart-beta investment vehicle designed to outperform broad small-cap benchmarks. Unlike traditional funds that weight companies solely by market capitalization, the AlphaDEX methodology uses a multi-factor screening process. It first selects stocks from the underlying index based on growth factors—such as price appreciation, sales growth, and earnings growth—and value factors—such as book value, cash flow, and return on assets. The selected companies are then tiered and weighted to tilt the portfolio toward those with higher fundamental scores.

This systematic, rules-based approach creates a portfolio that is more focused on fundamental quality and relative strength than a passive index. By rebalancing quarterly, the fund attempts to maintain its exposure to small-cap leaders that are exhibiting positive growth and value characteristics, making it a strategic choice for investors seeking a factor-tilted approach to the U.S. small-cap market.

Competitive Landscape

FYX operates in the highly competitive small-cap "smart-beta" and factor-tilted ETF space. Key optionable peers include the iShares Core S&P Small-Cap ETF, which is the gold standard for traditional market-cap-weighted exposure, and the Vanguard Small-Cap ETF, which offers broad, low-cost coverage. For those seeking specifically factor-based small-cap strategies, the iShares S&P Small-Cap 600 Value ETF is a prominent alternative.

Strategic Outlook and Innovation

The strategy is built on the belief that fundamental analysis and multi-factor screening can systematically identify high-performing small-cap companies better than simple market weighting. The fund serves as a core or tactical building block for investors who want to capture the historically higher risk premium associated with small-cap stocks but with an added layer of fundamental discipline.

Innovation is found in the AlphaDEX methodology itself, which removes human bias from the selection process. As the small-cap market is often characterized by higher volatility and higher dispersion in returns between winners and losers, this quantitative approach provides a disciplined, rules-based framework for navigating the segment.

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