Dow 30 Buy-Write, Series 12
The Dow 30 Buy-Write Portfolio invests in a fixed portfolio of common stocks included in the
Dow Jones Industrial Average (DJIA®), 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. The composition of the portfolio will not be adjusted to reflect any
subsequent changes in the index during the life of the portfolio. In addition, the portfolio only
includes common stocks from the index on which a LEAPS call option can be written.
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.
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.
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. The trust 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. Losses
from the decrease in value of the common stocks are limited by the premium income received
from the LEAPS, dividends received from the common stocks and interest received from the U.S.
Treasury Obligations.
| 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.
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.
Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility
within the markets in Russia, Europe, the Middle East 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 ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future 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.