FAD Butterfly Strategy
FAD (First Trust Multi Cap Growth AlphaDEX Fund), in the Financial Services sector, (Asset Management industry), listed on NASDAQ.
The First Trust Multi Cap Growth 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 Growth Index.
FAD (First Trust Multi Cap Growth AlphaDEX Fund) trades in the Financial Services sector, specifically Asset Management, with a market capitalization of approximately $409.6M, a beta of 1.30 versus the broader market, a 52-week range of 136.97-185.61, average daily share volume of 10K, a public-listing history dating back to 2007. These structural characteristics shape how FAD etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.30 places FAD roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. FAD pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a butterfly on FAD?
A long call butterfly buys one lower-strike call, sells two ATM calls, and buys one higher-strike call, paying a small net debit for a defined-risk position that maxes out if the underlying pins the middle strike at expiration.
Current FAD snapshot
As of May 15, 2026, spot at $180.81, ATM IV 19.70%, IV rank 28.70%, expected move 5.65%. The butterfly on FAD 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 butterfly structure on FAD specifically: FAD IV at 19.70% is on the cheap side of its 1-year range, which favors premium-buying structures like a FAD butterfly, with a market-implied 1-standard-deviation move of approximately 5.65% (roughly $10.21 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 FAD expiries trade a higher absolute premium for lower per-day decay. Position sizing on FAD should anchor to the underlying notional of $180.81 per share and to the trader's directional view on FAD etf.
FAD butterfly setup
The FAD butterfly below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With FAD near $180.81, the first option leg uses a $172.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed FAD 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 FAD shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $172.00 | $11.15 |
| Sell 2 | Call | $181.00 | $4.05 |
| Buy 1 | Call | $190.00 | $1.20 |
FAD butterfly risk and reward
- Net Premium / Debit
- -$425.00
- Max Profit (per contract)
- $402.64
- Max Loss (per contract)
- -$425.00
- Breakeven(s)
- $176.25, $185.75
- Risk / Reward Ratio
- 0.947
Max profit equals the wing width minus net debit times 100 (reached when the underlying pins the middle strike); max loss equals the net debit times 100. Two breakevens at lower-wing plus debit and upper-wing minus debit.
FAD butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on FAD. 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% | -$425.00 |
| $39.99 | -77.9% | -$425.00 |
| $79.96 | -55.8% | -$425.00 |
| $119.94 | -33.7% | -$425.00 |
| $159.92 | -11.6% | -$425.00 |
| $199.89 | +10.6% | -$425.00 |
| $239.87 | +32.7% | -$425.00 |
| $279.85 | +54.8% | -$425.00 |
| $319.83 | +76.9% | -$425.00 |
| $359.80 | +99.0% | -$425.00 |
When traders use butterfly on FAD
Butterflies on FAD are pinning bets - traders use them when they expect FAD to settle near a specific level at expiration (often the prior close, a round number, or the max-pain strike) and want defined-risk exposure to that outcome.
FAD thesis for this butterfly
The market-implied 1-standard-deviation range for FAD extends from approximately $170.60 on the downside to $191.02 on the upside. A FAD long call butterfly is a pinning play: it pays maximum at the middle strike if FAD settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current FAD IV rank near 28.70% 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 FAD at 19.70%. As a Financial Services name, FAD options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to FAD-specific events.
FAD butterfly positions are structurally neutral / pin (limited-risk, limited-reward); 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. FAD positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move FAD alongside the broader basket even when FAD-specific fundamentals are unchanged. Always rebuild the position from current FAD chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on FAD?
- A butterfly on FAD is the butterfly strategy applied to FAD (etf). The strategy is structurally neutral / pin (limited-risk, limited-reward): A long call butterfly buys one lower-strike call, sells two ATM calls, and buys one higher-strike call, paying a small net debit for a defined-risk position that maxes out if the underlying pins the middle strike at expiration. With FAD etf trading near $180.81, the strikes shown on this page are snapped to the nearest listed FAD chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are FAD butterfly max profit and max loss calculated?
- Max profit equals the wing width minus net debit times 100 (reached when the underlying pins the middle strike); max loss equals the net debit times 100. Two breakevens at lower-wing plus debit and upper-wing minus debit. For the FAD butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 19.70%), the computed maximum profit is $402.64 per contract and the computed maximum loss is -$425.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a FAD butterfly?
- The breakeven for the FAD butterfly priced on this page is roughly $176.25 and $185.75 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 FAD market-implied 1-standard-deviation expected move is approximately 5.65%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on FAD?
- Butterflies on FAD are pinning bets - traders use them when they expect FAD to settle near a specific level at expiration (often the prior close, a round number, or the max-pain strike) and want defined-risk exposure to that outcome.
- How does current FAD implied volatility affect this butterfly?
- FAD ATM IV is at 19.70% with IV rank near 28.70%, 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.