Covered Call Select Closed-End Portfolio, Series 84
The Covered Call Select Closed-End Portfolio is a unit investment trust which
invests in closed-end funds whose investments are diversified among common stocks.
These closed-end funds, on an ongoing and consistent basis, will sell covered
call options to seek a more controlled risk/reward outcome.
This unit investment trust seeks income and, to a lesser extent, capital appreciation; however, there is no assurance the objectives will be met.
What is a Covered Call Option?
A call option is a contractual obligation which gives the buyer of the option the right to purchase a certain number of shares of common stock from the writer (seller) of the option at a predetermined price. If the predetermined price is reached, the buyer has the right, depending on the type of option, to exercise the option at the option's expiration date or at any time up until the option's expiration. Though call options can be used for many investment purposes, they are typically used as a tool to potentially enhance returns, offer a current yield to investors, and provide limited downside protection.
An option is considered "covered" when a closed-end fund owns the
equity securities against which the options are sold. You should be aware that
a product which includes closed-end funds utilizing covered call strategies
may not be suitable for all investors. It may not be appropriate for investors
seeking above-average capital appreciation. Before investing, you should make
sure you understand the risks of this type of product, and whether it suits
your current financial objectives.
Closed-End Fund Features
Since closed-end funds maintain a relatively fixed pool of investment capital,
portfolio managers are better able to adhere to their investment philosophies
through greater flexibility and control. In addition,
closed-end funds don't have to manage fund liquidity to meet potentially large
Closed-end funds are structured to generally provide a more stable income stream
than other managed investment products because they are not subjected to cash
inflows and outflows, which can dilute dividends over time. However, the portfolio
cannot guarantee consistent income.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial professional
or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
An investment in this unmanaged unit investment trust should be made
with an understanding of the risks involved with an investment in a portfolio of closed-end funds which
invest in common stocks and options.
Closed-end funds are subject to various risks, including management’s ability to meet the fund’s investment objective, and to manage the fund’s portfolio when the underlying securities are redeemed or sold, during periods of
market turmoil and as investors’ perceptions regarding the funds or their underlying investments change. Unlike open-end funds, which trade at prices based on a current determination of the fund’s net asset value, closed-end
funds frequently trade at a discount to their net asset value in the secondary market.
Common stocks are subject to certain risks, such as an economic recession and the possible deterioration
of either the financial condition of the issuers of the equity securities or the general condition of the
Options are subject to various risks including that their value may be adversely affected if the market for
the option becomes less liquid or smaller. In addition, options will be affected by changes in the value and
dividend rates of the stock subject to the option, an increase in interest rates, a change in the actual and
perceived volatility of the stock market and the common stock and the remaining time to expiration.
An investment in a portfolio containing equity securities of foreign issuers is subject to additional risks,
including currency fluctuations, political risks, withholding, the lack of adequate financial information, and
exchange control restrictions impacting foreign issuers.
About one year after the United Kingdom officially departed the European Union (commonly referred to as “Brexit”), the United Kingdom and the European Union reached a trade agreement that became effective on December 31, 2020. It is not currently possible to determine the extent of the impact the Brexit trade agreement may have on the portfolio’s investments and this certainly could negatively impact current and future economic conditions in the United Kingdom and other countries, which could negatively impact the value of the portfolio’s investments.
As the use of Internet technology has become more prevalent in
the course of business, the trust has become more susceptible to
potential operational risks through breaches in cybersecurity.
The COVID-19 global pandemic has caused significant volatility and declines in global financial markets, causing losses for investors. The development of vaccines has slowed the spread of the virus and allowed for the
resumption of “reasonably” normal business activity in the United States, although many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging
variants of the disease.
It is important to note that an investment can be made in the
underlying funds directly rather than through the trust. These
direct investments can be made without paying the trust’s sales
charge, operating expenses and organizational costs.
This UIT is a buy and hold strategy and investors should consider
their ability to hold the trust until maturity. There may be tax
consequences unless units are purchased in an IRA or other
The value of the securities held by the trust may be subject to
steep declines or increased volatility due to changes in
performance or perception of the issuers.
For a discussion of additional risks of investing in the trust see the "Risk Factors" section of the prospectus.