FAB Collar Strategy
FAB (First Trust Multi Cap Value AlphaDEX Fund), in the Financial Services sector, (Asset Management industry), listed on NASDAQ.
FAB holds a broad value-focused portfolio of stocks from the Nasdaq US Select Index Family. The fund uses a quantitative methodology to select and weight securities in three different size segments. In particular, FAB uses three value factors (P/B, ROA, and P/FCF) to rank companies. Once the fund has selected those firms best positioned for value, it employs a tiered weighting strategy that assigns weights of 50% to large caps, 30% to midcaps and 20% to small-caps. FAB makes huge sector bets and carries a small tilt. The index is reconstituted and rebalanced quarterly.
FAB (First Trust Multi Cap Value AlphaDEX Fund) trades in the Financial Services sector, specifically Asset Management, with a market capitalization of approximately $137.9M, a beta of 0.83 versus the broader market, a 52-week range of 80.81-102.3404, average daily share volume of 2K, a public-listing history dating back to 2007, approximately 1K full-time employees. These structural characteristics shape how FAB etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.83 places FAB roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. FAB pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a collar on FAB?
A collar pairs long stock with a protective out-of-the-money put financed by a short out-of-the-money call, capping both tails of the position around the current spot.
Current FAB snapshot
As of June 29, 2026, spot at $101.77, ATM IV 15.60%, IV rank 11.11%, expected move 4.47%. The collar on FAB 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 18-day expiry.
Why this collar structure on FAB specifically: IV regime affects collar pricing on both sides; compressed FAB IV at 15.60% typically pushes the short call premium to roughly offset the long put cost, with a market-implied 1-standard-deviation move of approximately 4.47% (roughly $4.55 on the underlying). The 18-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated FAB expiries trade a higher absolute premium for lower per-day decay. Position sizing on FAB should anchor to the underlying notional of $101.77 per share and to the trader's directional view on FAB etf.
FAB collar setup
The FAB collar below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With FAB near $101.77, the first option leg uses a $105.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed FAB chain at a 18-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 FAB shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $101.77 | long |
| Sell 1 | Call | $105.00 | $0.39 |
| Buy 1 | Put | $97.00 | $0.16 |
FAB collar risk and reward
- Net Premium / Debit
- -$10,154.00
- Max Profit (per contract)
- $346.00
- Max Loss (per contract)
- -$454.00
- Breakeven(s)
- $101.54
- Risk / Reward Ratio
- 0.762
Max profit roughly equals short-call strike minus cost basis plus net premium; max loss roughly equals cost basis minus long-put strike minus net premium. Breakeven shifts by the net premium.
FAB collar payoff curve
Modeled P&L at expiration across a range of underlying prices for the collar on FAB. 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.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | -$454.00 |
| $22.51 | -77.9% | -$454.00 |
| $45.01 | -55.8% | -$454.00 |
| $67.51 | -33.7% | -$454.00 |
| $90.01 | -11.6% | -$454.00 |
| $112.51 | +10.6% | +$346.00 |
| $135.01 | +32.7% | +$346.00 |
| $157.52 | +54.8% | +$346.00 |
| $180.02 | +76.9% | +$346.00 |
| $202.52 | +99.0% | +$346.00 |
When traders use collar on FAB
Collars on FAB hedge an existing long FAB etf position; the long put sets a floor while the short call finances it, often run as a near-zero-cost hedge during expected volatility windows.
FAB thesis for this collar
The market-implied 1-standard-deviation range for FAB extends from approximately $97.22 on the downside to $106.32 on the upside. A FAB collar hedges an existing long FAB position with a protective put while financing the put cost via a short call; when the premiums roughly offset, the collar acts as a near-zero-cost insurance band around the current spot. Current FAB IV rank near 11.11% 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 FAB at 15.60%. As a Financial Services name, FAB options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to FAB-specific events.
FAB collar positions are structurally neutral (protective); 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. FAB positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move FAB alongside the broader basket even when FAB-specific fundamentals are unchanged. Always rebuild the position from current FAB chain quotes before placing a trade.
Frequently asked questions
- What is a collar on FAB?
- A collar on FAB is the collar strategy applied to FAB (etf). The strategy is structurally neutral (protective): A collar pairs long stock with a protective out-of-the-money put financed by a short out-of-the-money call, capping both tails of the position around the current spot. With FAB etf trading near $101.77, the strikes shown on this page are snapped to the nearest listed FAB chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are FAB collar max profit and max loss calculated?
- Max profit roughly equals short-call strike minus cost basis plus net premium; max loss roughly equals cost basis minus long-put strike minus net premium. Breakeven shifts by the net premium. For the FAB collar priced from the end-of-day chain at a 30-day expiry (ATM IV 15.60%), the computed maximum profit is $346.00 per contract and the computed maximum loss is -$454.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a FAB collar?
- The breakeven for the FAB collar priced on this page is roughly $101.54 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 FAB market-implied 1-standard-deviation expected move is approximately 4.47%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a collar on FAB?
- Collars on FAB hedge an existing long FAB etf position; the long put sets a floor while the short call finances it, often run as a near-zero-cost hedge during expected volatility windows.
- How does current FAB implied volatility affect this collar?
- FAB ATM IV is at 15.60% with IV rank near 11.11%, 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.