REM Butterfly Strategy
REM (iShares Mortgage Real Estate ETF), in the Financial Services sector, (Asset Management industry), listed on CBOE.
The Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE NAREIT Mortgage REITs Index. The Index measures the performance of the residential and commercial mortgage real estate sector of the U.S. equity market.
REM (iShares Mortgage Real Estate ETF) trades in the Financial Services sector, specifically Asset Management, with a market capitalization of approximately $556.5M, a beta of 1.02 versus the broader market, a 52-week range of 20.41-24.05, average daily share volume of 439K, a public-listing history dating back to 2007. These structural characteristics shape how REM etf options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.02 places REM roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. REM pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a butterfly on REM?
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 REM snapshot
As of June 30, 2026, spot at $22.16, ATM IV 485.60%, IV rank 100.00%, expected move 139.22%. The butterfly on REM 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 17-day expiry.
Why this butterfly structure on REM specifically: REM IV at 485.60% is rich versus its 1-year range, which makes a premium-buying REM butterfly relatively expensive in absolute-cost terms, with a market-implied 1-standard-deviation move of approximately 139.22% (roughly $30.85 on the underlying). The 17-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated REM expiries trade a higher absolute premium for lower per-day decay. Position sizing on REM should anchor to the underlying notional of $22.16 per share and to the trader's directional view on REM etf.
REM butterfly setup
The REM 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 REM near $22.16, the first option leg uses a $21.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed REM chain at a 17-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 REM shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $21.00 | $1.13 |
| Sell 2 | Call | $22.00 | $0.43 |
| Buy 1 | Call | $23.00 | $0.10 |
REM butterfly risk and reward
- Net Premium / Debit
- -$37.50
- Max Profit (per contract)
- $57.13
- Max Loss (per contract)
- -$37.50
- Breakeven(s)
- $21.38, $22.63
- Risk / Reward Ratio
- 1.524
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.
REM butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on REM. 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% | -$37.50 |
| $4.91 | -77.8% | -$37.50 |
| $9.81 | -55.7% | -$37.50 |
| $14.71 | -33.6% | -$37.50 |
| $19.60 | -11.5% | -$37.50 |
| $24.50 | +10.6% | -$37.50 |
| $29.40 | +32.7% | -$37.50 |
| $34.30 | +54.8% | -$37.50 |
| $39.20 | +76.9% | -$37.50 |
| $44.10 | +99.0% | -$37.50 |
When traders use butterfly on REM
Butterflies on REM are pinning bets - traders use them when they expect REM 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.
REM thesis for this butterfly
The market-implied 1-standard-deviation range for REM extends from approximately $-8.69 on the downside to $53.01 on the upside. A REM long call butterfly is a pinning play: it pays maximum at the middle strike if REM settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current REM IV rank near 100.00% sits in the upper third of its 1-year distribution, which historically reverts; this raises the bar for premium-buying structures and lowers it for premium-selling structures on REM at 485.60%. As a Financial Services name, REM options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to REM-specific events.
REM 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. REM positions also carry Financial Services sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move REM alongside the broader basket even when REM-specific fundamentals are unchanged. Always rebuild the position from current REM chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on REM?
- A butterfly on REM is the butterfly strategy applied to REM (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 REM etf trading near $22.16, the strikes shown on this page are snapped to the nearest listed REM chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are REM 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 REM butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 485.60%), the computed maximum profit is $57.13 per contract and the computed maximum loss is -$37.50 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a REM butterfly?
- The breakeven for the REM butterfly priced on this page is roughly $21.38 and $22.63 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 REM market-implied 1-standard-deviation expected move is approximately 139.22%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on REM?
- Butterflies on REM are pinning bets - traders use them when they expect REM 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 REM implied volatility affect this butterfly?
- REM ATM IV is at 485.60% with IV rank near 100.00%, which is elevated relative to its 1-year range. Premium-selling structures (covered call, cash-secured put, iron condor) generally look more attractive when IV rank is high; premium-buying structures (long call, long put, debit spreads) are more expensive in that regime.