Global Commodities Buy-Write, Series 1
The Global Commodities Buy-Write Portfolio invests in a fixed portfolio of common stocks of
global commodities companies, and simultaneously, the portfolio sells a Long-Term Equity
AnticiPation Securities (LEAPS®) call option against each position. The writing (selling) of a
call option generates income in the form of a premium paid by the option buyer. The portfolio
invests this income in U.S. Treasury notes and the interest received from the notes is paid to unit
You should be aware that a product which includes writing call options 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.
Why Invest In Commodities
Commodities are a unique asset class that respond differently than traditional asset classes
to changing economic conditions. Commodities offer the potential for reduced risk through
improved diversification, the potential for attractive returns, and may potentially provide a hedge
against rising inflation. The global commodity sector is made up of several separate markets
including agriculture, metals and energy. These commodities are the building blocks of every
economy in the world.
Illustrative Market Scenarios
Stock Prices Increase Above the LEAPS’ Exercise Price | The LEAPS are exercised and the
underlying stock shares are sold at the strike price. Profits are limited to the premium income
received from writing the LEAPS, dividends received from the common stocks prior to their
sale from the portfolio, interest received from the U.S. Treasury Obligations, plus the difference
between each common stock’s initial price and their strike price. Investors will forgo any
dividends paid on the common stocks subsequent to their sale from the portfolio and any gain in
the underlying stock price after the stock is sold. It is important to note that writing covered calls
limits the appreciation potential of the underlying common stocks.
Stock Prices Remain Stable | The LEAPS expire worthless and the portfolio still owns the
common stock shares. Profits are limited to the premium income received from writing the
LEAPS, plus dividends from the common stocks, as well as interest received from the U.S.
Stock Prices Decrease | The LEAPS expire worthless and the portfolio still owns the common
stock shares. The break even on the stocks is lowered by the premium income received from
writing the LEAPS. In addition, the portfolio will receive dividends from the common stocks, and
interest from the U.S. Treasury Obligations.
This unit investment trust seeks income, with capital appreciation as a secondary objective. There
is, however, no assurance that the objectives will be achieved.
|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 advisor 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 the understanding of the risks involved with common stocks, LEAPS, and U.S. Treasury notes.
Common stocks are subject to 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 stock market.
The value of U.S. Treasury notes will be adversely affected by decreases in bond prices and
increases in interest rates.
The value of the LEAPS is deducted from the value of the portfolio assets when determining the value of a
unit. As the value of the LEAPS increases, it has a more negative impact on the value of the units. The value
of the LEAPS will also be affected by changes in the value and dividend rates of the underlying stocks, an
increase in interest rates, a change in the actual and perceived volatility of the stock market and the stocks
and the remaining time to expiration. Additionally, the value of the LEAPS does not increase or decrease at
the same rate as the underlying stock. However, as the LEAPS approach their expiration date, their value
increasingly moves with the price of the stock.
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.
You should be aware that an investment that is concentrated in stocks of commodities companies in both the
energy and materials sectors which involves additional risks, including limited diversification. The companies
engaged in the energy sector are subject to certain risks, including price and supply fluctuations caused
by international politics, energy conservation, taxes, price controls, and other regulatory policies of various
governments. Falling oil and gas prices may negatively impact the profitability and business prospects of
certain energy companies. The companies engaged in the materials sector, including companies within the
precious metals industry, are subject to price and supply fluctuations, excess capacity, economic recession,
domestic and international politics, government regulations, volatile interest rates, consumer spending
trends and overall capital spending levels. Commodity prices are subject to several factors, including price and
supply fluctuations, excess capacity, economic recession, domestic and international politics, government
regulations, volatile interest rates, consumer spending trends and overall capital spending levels.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks,
withholding, the lack of adequate financial information, and exchange control restrictions impacting
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
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
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.
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.
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 qualified plan.