Strap
A straddle tilted bullish — two calls and one put — to profit from a big move in either direction, more so on the upside.
What is a Strap?
A Strap is a bullish variation of the long straddle. You buy two ATM calls and one ATM put at the same strike and expiry. Like a straddle it profits from a large move in either direction, but the extra call gives it a bullish bias — an up-move pays roughly twice as fast as an equivalent down-move. It is used when you expect a big move and lean bullish on direction, but still want protection if you are wrong.
Payoff Diagram
Profit & Loss at expiry
Per share (multiply by lot size 75). Gold dots mark breakeven points; green = profit, red = loss.
Construction
- Buy 2 ATM Calls.
- Buy 1 ATM Put (same strike, same expiry).
- Total premium of all three legs = maximum loss.
When to Use It
Use before a major catalyst when you expect a large move and think up is more likely than down. Enter when IV is low relative to the expected move to avoid a post-event volatility crush.
The Greeks
Positive Delta bias, strong Positive Gamma and Vega, strong Negative Theta.
Risks & Considerations
- Triple time decay — three long options bleed Theta.
- Needs a substantial move to overcome the large combined premium.
- Volatility crush after the event can cause a loss even if it moves.
Worked Example (Nifty)
Illustrative trade — lot size 75
Nifty 20,000. Buy 2× 20,000 CE ₹200 and 1× 20,000 PE ₹200 = ₹600 (₹45,000 max loss). Upper breakeven 20,300, lower breakeven 19,400. A rally to 20,600 makes the two calls worth ₹1,200, profit = (1200 − 600) × 75 = ₹45,000. A fall to 19,400 only breaks even — hence the bullish tilt.