FEMS Butterfly Strategy
FEMS (First Trust Emerging Markets Small Cap AlphaDEX Fund), in the Financial Services sector, (Asset Management industry), listed on NASDAQ.
The First Trust Emerging Markets Small Cap 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 the Fund's fees and expenses, of an equity index called the Nasdaq AlphaDEX Emerging Markets Small Cap Index.
FEMS (First Trust Emerging Markets Small Cap AlphaDEX Fund) trades in the Financial Services sector, specifically Asset Management, with a market capitalization of approximately $258.4M, a beta of 0.63 versus the broader market, a 52-week range of 38.53-49.49, average daily share volume of 33K, a public-listing history dating back to 2012. These structural characteristics shape how FEMS etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.63 indicates FEMS has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure. FEMS pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a butterfly on FEMS?
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 FEMS snapshot
As of May 15, 2026, spot at $50.57, ATM IV 31.10%, IV rank 17.79%, expected move 8.92%. The butterfly on FEMS 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 FEMS specifically: FEMS IV at 31.10% is on the cheap side of its 1-year range, which favors premium-buying structures like a FEMS butterfly, with a market-implied 1-standard-deviation move of approximately 8.92% (roughly $4.51 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 FEMS expiries trade a higher absolute premium for lower per-day decay. Position sizing on FEMS should anchor to the underlying notional of $50.57 per share and to the trader's directional view on FEMS etf.
FEMS butterfly setup
The FEMS 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 FEMS near $50.57, the first option leg uses a $48.04 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed FEMS 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 FEMS shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $48.04 | N/A |
| Sell 2 | Call | $50.57 | N/A |
| Buy 1 | Call | $53.10 | N/A |
FEMS butterfly 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
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.
FEMS butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on FEMS. 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 butterfly on FEMS
Butterflies on FEMS are pinning bets - traders use them when they expect FEMS 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.
FEMS thesis for this butterfly
The market-implied 1-standard-deviation range for FEMS extends from approximately $46.06 on the downside to $55.08 on the upside. A FEMS long call butterfly is a pinning play: it pays maximum at the middle strike if FEMS settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current FEMS IV rank near 17.79% 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 FEMS at 31.10%. As a Financial Services name, FEMS options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to FEMS-specific events.
FEMS 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. FEMS positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move FEMS alongside the broader basket even when FEMS-specific fundamentals are unchanged. Always rebuild the position from current FEMS chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on FEMS?
- A butterfly on FEMS is the butterfly strategy applied to FEMS (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 FEMS etf trading near $50.57, the strikes shown on this page are snapped to the nearest listed FEMS chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are FEMS 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 FEMS butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 31.10%), 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 FEMS butterfly?
- The breakeven for the FEMS butterfly 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 FEMS market-implied 1-standard-deviation expected move is approximately 8.92%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on FEMS?
- Butterflies on FEMS are pinning bets - traders use them when they expect FEMS 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 FEMS implied volatility affect this butterfly?
- FEMS ATM IV is at 31.10% with IV rank near 17.79%, 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.