FT Vest S&P 500 Dividend Aristocrats Target Income ETF (KNG US) – Portfolio Construction Methodology

The underlying Cboe S&P 500 Dividend Aristocrats Target Income Index Monthly Series delivers a systematic covered-call overlay on the S&P 500 Dividend Aristocrats. The equity sleeve mirrors the equal-weighted Aristocrats universe (S&P 500 members with ≥25 consecutive years of dividend increases) and is rebalanced quarterly and reconstituted annually. Each month, the index sells one-month, at-the-money calls on each constituent on Cboe; the overwrite fraction per stock is calibrated so that option premium plus dividends targets the S&P 500 dividend yield 3% on an annualized basis, capped at a 100% overwrite. Option notionals are aligned to underlying share counts, with expiries laddered monthly. Weights of equity-option pairs are reset daily to reflect the equity sleeve’s equal weights. Corporate actions are handled per standard index practice.

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