FAB Collar Strategy
FAB (First Trust Multi Cap Value AlphaDEX Fund), in the Financial Services sector, (Asset Management industry), listed on NASDAQ.
The First Trust Multi Cap Value AlphaDEX Fund is an exchange-traded fund. The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the Nasdaq AlphaDEX Multi Cap Value Index.
FAB (First Trust Multi Cap Value AlphaDEX Fund) trades in the Financial Services sector, specifically Asset Management, with a market capitalization of approximately $137.6M, a beta of 0.88 versus the broader market, a 52-week range of 77.2-99.76, average daily share volume of 3K, a public-listing history dating back to 2007. These structural characteristics shape how FAB etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.88 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 May 15, 2026, spot at $95.37, ATM IV 17.80%, IV rank 20.08%, expected move 5.10%. 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 63-day expiry.
Why this collar structure on FAB specifically: IV regime affects collar pricing on both sides; compressed FAB IV at 17.80% typically pushes the short call premium to roughly offset the long put cost, with a market-implied 1-standard-deviation move of approximately 5.10% (roughly $4.87 on the underlying). The 63-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 $95.37 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 $95.37, the first option leg uses a $100.00 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 63-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 | $95.37 | long |
| Sell 1 | Call | $100.00 | $1.08 |
| Buy 1 | Put | $91.00 | $1.23 |
FAB collar risk and reward
- Net Premium / Debit
- -$9,552.00
- Max Profit (per contract)
- $448.00
- Max Loss (per contract)
- -$452.00
- Breakeven(s)
- $95.52
- Risk / Reward Ratio
- 0.991
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% | -$452.00 |
| $21.10 | -77.9% | -$452.00 |
| $42.18 | -55.8% | -$452.00 |
| $63.27 | -33.7% | -$452.00 |
| $84.35 | -11.6% | -$452.00 |
| $105.44 | +10.6% | +$448.00 |
| $126.52 | +32.7% | +$448.00 |
| $147.61 | +54.8% | +$448.00 |
| $168.70 | +76.9% | +$448.00 |
| $189.78 | +99.0% | +$448.00 |
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 $90.50 on the downside to $100.24 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 20.08% 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 17.80%. 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 $95.37, 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 17.80%), the computed maximum profit is $448.00 per contract and the computed maximum loss is -$452.00 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 $95.52 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 5.10%; 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 17.80% with IV rank near 20.08%, 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.