FAD Collar 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 collar on FAD?
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 FAD snapshot
As of May 15, 2026, spot at $180.81, ATM IV 19.70%, IV rank 28.70%, expected move 5.65%. The collar 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 collar structure on FAD specifically: IV regime affects collar pricing on both sides; compressed FAD IV at 19.70% typically pushes the short call premium to roughly offset the long put cost, 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 collar setup
The FAD 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 FAD near $180.81, the first option leg uses a $190.00 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 100 shares | Stock | $180.81 | long |
| Sell 1 | Call | $190.00 | $1.20 |
| Buy 1 | Put | $172.00 | $1.70 |
FAD collar risk and reward
- Net Premium / Debit
- -$18,131.00
- Max Profit (per contract)
- $869.00
- Max Loss (per contract)
- -$931.00
- Breakeven(s)
- $181.31
- Risk / Reward Ratio
- 0.933
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.
FAD collar payoff curve
Modeled P&L at expiration across a range of underlying prices for the collar 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% | -$931.00 |
| $39.99 | -77.9% | -$931.00 |
| $79.96 | -55.8% | -$931.00 |
| $119.94 | -33.7% | -$931.00 |
| $159.92 | -11.6% | -$931.00 |
| $199.89 | +10.6% | +$869.00 |
| $239.87 | +32.7% | +$869.00 |
| $279.85 | +54.8% | +$869.00 |
| $319.83 | +76.9% | +$869.00 |
| $359.80 | +99.0% | +$869.00 |
When traders use collar on FAD
Collars on FAD hedge an existing long FAD 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.
FAD thesis for this collar
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 collar hedges an existing long FAD 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 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 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. 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 collar on FAD?
- A collar on FAD is the collar strategy applied to FAD (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 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 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 FAD collar priced from the end-of-day chain at a 30-day expiry (ATM IV 19.70%), the computed maximum profit is $869.00 per contract and the computed maximum loss is -$931.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a FAD collar?
- The breakeven for the FAD collar priced on this page is roughly $181.31 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 collar on FAD?
- Collars on FAD hedge an existing long FAD 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 FAD implied volatility affect this collar?
- 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.