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Health Care Select Buy-Write, Series 1

The health care industry has been responsible for several discoveries that have led to new drugs and products designed to better serve the masses, especially the aging population. These discoveries have improved the quality of life and the life expectancy of millions. More recent research, relating to areas such as genomics, is providing avenues of growth never before imagined. Debilitating diseases, previously untreatable, are now often manageable or even curable. From 2021-2030, it is projected that health care spending will grow at an average rate of 5.1% annually. In addition, growth in health care spending is also anticipated to be 5.1% of GDP per year over the same period; as a result, the health care share of GDP is expected to be 19.6% in 2030, nearly the same as the 19.7% in 2020.1

The Health Care Select Buy-Write Portfolio is a unit investment trust which invests in a fixed portfolio of common stocks of health care 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 holders periodically.

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.

National Health Expenditures Chart

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 before the date the option to purchase is exercised, 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 after the date the option to purchase is exercised 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. Treasury Obligations.

Stock Prices Decrease | The LEAPS expire worthless and the portfolio still owns the common stock shares. However, the premium income received from writing the LEAPS® lowers the breakeven point on the common stocks by effectively reducing the common stocks’ original cost. In addition, the portfolio will receive dividends from the common stocks, and interest from the U.S. Treasury Obligations.

1 CMS.gov

Portfolio Objectives

This unit investment trust seeks income, with limited 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.

Risk Considerations
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.

You should be aware that the portfolio is concentrated in stocks in the health care sector which involves additional risks, including limited diversification. The companies engaged in the health care sector are subject to fierce competition, high research and development costs, governmental regulations, loss of patent protection, and changing consumer spending trends. In addition, health crises, such as a pandemic outbreak, can severely impact the health care industry in particular.

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 non- U.S. issuers.

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.

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 and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, 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.

 

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Fund Cusip Information
30330C820 (Cash)
30330C838 (Cash-Fee)
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
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