First Trust, the Wheaton, Ill.-based fund provider known for its niche strategies that include an Internet fund, filed paperwork with U.S. regulators to market an ETF designed to help investors hedge tail risk in an S&P 500 portfolio.

The First Trust CBOE VIX Tail Hedge Index Fund, which will track the CBOE S&P VIX Tail Hedge Index, will consist of equities from the S&P 500 universe.

It will include a “variable option overlay” consisting of one-month call options on the VIX Index in a strategy designed solely to profit from sudden volatility spikes while at the same time offsetting losses stocks typically incur from such events.

The fund’s tail-hedging strategy, in this context, is an attempt to protect a portfolio against sudden, unexpected market action that usually leads to increased volatility, the company said in the filing. To do so, First Trust will look to the CBOE Volatility Index, or VIX—which tracks near-term future volatility—and determine the extent of the fund’s overlay based on the level of market volatility.

The fund’s theme is timely to the extent that volatility levels have recently been near historic highs. The spike in volatility has coincided with the rollout of a number of strategies that strive to ride the volatility wave while protecting assets. The volatility has also helped push U.S. regulators to take a closer look at the role of ETFs in market movement.

This morning, for example, a committee in the U.S. Senate addressed levels in a special hearing the question of how ETFs are affecting the market and whether they contribute to volatility

Funds like Invesco PowerShares’ S&P 500 Low Volatility ETF (NYSEArca: SPLV)—which isolates the 100 least-market-movement-sensitive stocks in the S&P 500 Index—offer different ways to express views on the volatility theme, and have resonated with investors. SPLV was launched in May and has gathered more than $327 million.

iPath and ETRACs are also among the providers in the space, each having an extensive roster of ETNs that focus on volatility and the S&P 500. The biggest VIX ETN of all, the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX), has more than $900 million in assets.

First Trust’s ETF plans to own all securities included in the index, and it may also sell covered call options, which would enable investors to choose whether to receive a security at a predetermined price and time, the company added.

While the options overlay is the protecting feature for times of volatile market action, it too comes with an inherent risk, the company noted.

“As a writer of covered call options, the fund will forgo the opportunity to profit from increases in the market value of a security above the option’s strike price,” the company said in the filing.

The possible use of derivatives was another source of risk investors should take notice of, the filing said.

No ticker or fees were disclosed in the filing.