Virtus InfraCap U.S. Preferred Stock ETF (PFFA) Covered Calls

Virtus InfraCap U.S. Preferred Stock ETF is an actively managed exchange-traded fund that invests in a diversified portfolio of preferred securities issued by U.S. companies. The fund seeks to provide high current income and capital appreciation by selecting securities with attractive yield-to-call profiles. It employs a modest amount of leverage, typically between 20% and 30%, to enhance total returns and monthly distributions for income-focused investors.

You can sell covered calls on Virtus InfraCap U.S. Preferred Stock ETF 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 PFFA (prices last updated Fri 4:16 PM ET):

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

Virtus InfraCap U.S. Preferred Stock ETF (PFFA) is an actively managed ETF that targets the preferred integrated infrastructure and real estate sectors of the U.S. economy. Unlike passive index funds that weight holdings by market capitalization, PFFA’s management team utilizes a fundamental research process to select securities they believe offer the best risk-adjusted yields. This active approach allows the fund to avoid overvalued issues and capitalize on mispriced securities within the preferred stock market.

A distinguishing feature of the fund is its use of modest leverage and an options strategy to enhance current income. By borrowing at short-term rates to invest in higher-yielding preferred shares, the fund aims to deliver a distribution yield that is significantly higher than traditional, unleveraged preferred stock ETFs. The fund typically maintains a diversified portfolio of 100 to 150 securities, focusing on companies with stable cash flows and strong credit profiles in the midstream energy, utility, and REIT industries.

Investment Strategy and Fleet

The fund’s managers prioritize "yield-to-call" analysis, identifying securities that are likely to be redeemed by the issuer or provide sustained high coupons. This strategy is particularly effective in identifying "fallen angels" or undervalued preferreds that the market has mispriced due to temporary sector volatility. By focusing on the Infrastructure and Real Estate sectors, the fund targets industries that historically use preferred stock as a core component of their capital structure.

Because PFFA is actively managed, it has the ability to shift its duration and credit exposure in response to changing interest rate environments. In periods of rising rates, the managers may favor variable-rate or "fixed-to-float" preferreds to protect the fund’s net asset value (NAV). This flexibility, combined with monthly distributions, makes the fund a popular choice for retirees and income-oriented investors seeking to maximize their monthly cash flow.

Competitive Landscape

1. iShares Preferred and Income Securities ETF is the largest and most liquid fund in the category. It follows a passive index and serves as the primary benchmark for the preferred stock market, offering a lower-yield, unleveraged alternative to PFFA.
2. Invesco Preferred ETF tracks an index of fixed-rate preferred securities. It is a major competitor for investors seeking broad, systematic exposure to high-quality preferred issues with high liquidity and narrow spreads.
3. Invesco Variable Rate Preferred ETF focuses specifically on variable-rate preferreds. It competes for investors who are particularly concerned about interest rate risk and want to hedge against rising rates.
4. First Trust Preferred Securities and Income ETF is an actively managed global fund. It competes directly with PFFA for investors who prefer active security selection, though it often holds a higher percentage of international and institutional "over-the-counter" preferreds.
5. InfraCap REIT Preferred ETF (PFFR) is a sister fund managed by the same advisor that focuses exclusively on the REIT sector. While it does not offer the same options liquidity as larger peers, it is a primary rival for targeted income in the real estate space.

Strategic Outlook and Innovation

The fund is positioned to benefit from the continued demand for high-yield assets in an environment where traditional fixed-income yields remain volatile. The management team’s ability to utilize leverage strategically allows the fund to maintain a competitive "yield advantage" over its passive peers. As the preferred market continues to grow in complexity, the fund’s focus on active credit analysis is intended to provide a layer of protection against defaults and distressed issuers.

Innovation within the fund involves the tactical use of exchange-traded options to generate additional premium income and manage downside risk. By selling covered calls on individual holdings or the broader index when appropriate, the managers can supplement the fund’s organic dividend income. This "total return" mindset ensures that the fund is not just chasing the highest yield, but is also focused on preserving and growing shareholder capital over a full market cycle.

Want more examples? PFF Covered Calls | PFFD Covered Calls