DVOL Strangle Strategy
DVOL (First Trust Dorsey Wright Momentum & Low Volatility ETF), in the Financial Services sector, (Asset Management industry), listed on NASDAQ.
The First Trust Dorsey Wright Momentum & Low Volatility ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an index called the Dorsey Wright Momentum Plus Low Volatility Index (the "Index"). Under normal conditions, the Fund will invest at least 90% of its net assets (including investment borrowings) in the equity securities that comprise the Index. The Fund, using an indexing investment approach, attempts to replicate, before fees and expenses, the performance of the Index. The Fund's investment advisor seeks a correlation of 0.95 or better (before fees and expenses) between the Fund's performance and the performance of the Index; a figure of 1.00 would represent perfect correlation. The Index is owned and was developed by Nasdaq, Inc. (the "Index Provider").
DVOL (First Trust Dorsey Wright Momentum & Low Volatility ETF) trades in the Financial Services sector, specifically Asset Management, with a market capitalization of approximately $74.2M, a beta of 0.71 versus the broader market, a 52-week range of 33.6-37.5, average daily share volume of 9K, a public-listing history dating back to 2018. These structural characteristics shape how DVOL etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.71 places DVOL roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. DVOL pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a strangle on DVOL?
A long strangle buys an OTM call and an OTM put at offset strikes, cheaper than a straddle but requiring a larger underlying move to profit since both wings start out-of-the-money.
Current DVOL snapshot
As of May 15, 2026, spot at $36.41, ATM IV 38.90%, IV rank 14.94%, expected move 11.15%. The strangle on DVOL below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 34-day expiry.
Why this strangle structure on DVOL specifically: DVOL IV at 38.90% is on the cheap side of its 1-year range, which favors premium-buying structures like a DVOL strangle, with a market-implied 1-standard-deviation move of approximately 11.15% (roughly $4.06 on the underlying). The 34-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated DVOL expiries trade a higher absolute premium for lower per-day decay. Position sizing on DVOL should anchor to the underlying notional of $36.41 per share and to the trader's directional view on DVOL etf.
DVOL strangle setup
The DVOL strangle below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With DVOL near $36.41, the first option leg uses a $38.23 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed DVOL chain at a 34-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 DVOL shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $38.23 | N/A |
| Buy 1 | Put | $34.59 | N/A |
DVOL strangle risk and reward
- Net Premium / Debit
- N/A
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- Unbounded
- Breakeven(s)
- None on modeled curve
- Risk / Reward Ratio
- N/A
Upside max profit is unbounded; downside max profit is bounded at the put strike minus the combined debit (reached at zero). Max loss equals the combined debit times 100 (reached anywhere between the two OTM strikes). Two breakevens at call-strike plus debit and put-strike minus debit.
DVOL strangle payoff curve
Modeled P&L at expiration across a range of underlying prices for the strangle on DVOL. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
When traders use strangle on DVOL
Strangles on DVOL are the cheaper cousin of the straddle - traders use them when they want a large directional move but are willing to give up the inner-strike sensitivity in exchange for a lower up-front debit on the DVOL chain.
DVOL thesis for this strangle
The market-implied 1-standard-deviation range for DVOL extends from approximately $32.35 on the downside to $40.47 on the upside. A DVOL long strangle is the OTM cousin of the straddle: lower up-front cost but the underlying has to travel further past either OTM strike before the position turns profitable at expiration. Current DVOL IV rank near 14.94% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on DVOL at 38.90%. As a Financial Services name, DVOL options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to DVOL-specific events.
DVOL strangle positions are structurally neutral / high-volatility (long premium, OTM); the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. DVOL positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move DVOL alongside the broader basket even when DVOL-specific fundamentals are unchanged. Always rebuild the position from current DVOL chain quotes before placing a trade.
Frequently asked questions
- What is a strangle on DVOL?
- A strangle on DVOL is the strangle strategy applied to DVOL (etf). The strategy is structurally neutral / high-volatility (long premium, OTM): A long strangle buys an OTM call and an OTM put at offset strikes, cheaper than a straddle but requiring a larger underlying move to profit since both wings start out-of-the-money. With DVOL etf trading near $36.41, the strikes shown on this page are snapped to the nearest listed DVOL chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are DVOL strangle max profit and max loss calculated?
- Upside max profit is unbounded; downside max profit is bounded at the put strike minus the combined debit (reached at zero). Max loss equals the combined debit times 100 (reached anywhere between the two OTM strikes). Two breakevens at call-strike plus debit and put-strike minus debit. For the DVOL strangle priced from the end-of-day chain at a 30-day expiry (ATM IV 38.90%), the computed maximum profit is unbounded per contract and the computed maximum loss is unbounded per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a DVOL strangle?
- The breakeven for the DVOL strangle priced on this page is no defined breakeven on the modeled curve at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current DVOL market-implied 1-standard-deviation expected move is approximately 11.15%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a strangle on DVOL?
- Strangles on DVOL are the cheaper cousin of the straddle - traders use them when they want a large directional move but are willing to give up the inner-strike sensitivity in exchange for a lower up-front debit on the DVOL chain.
- How does current DVOL implied volatility affect this strangle?
- DVOL ATM IV is at 38.90% with IV rank near 14.94%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.