Strip
A straddle tilted bearish — one call and two puts — to profit from a big move in either direction, more so on the downside.
What is a Strip?
A Strip is a bearish variation of the long straddle. You buy one ATM call and two ATM puts at the same strike and expiry. It profits from a large move in either direction, but the extra put gives it a bearish bias — a down-move pays roughly twice as fast as an equivalent up-move. It suits a view that a big move is coming and that a fall is more likely than a rise.
Payoff Diagram
Profit & Loss at expiry
Per share (multiply by lot size 75). Gold dots mark breakeven points; green = profit, red = loss.
Construction
- Buy 1 ATM Call.
- Buy 2 ATM Puts (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 down is more likely than up. Enter when IV is low relative to the expected move to avoid volatility crush.
The Greeks
Negative Delta bias, strong Positive Gamma and Vega, strong Negative Theta.
Risks & Considerations
- Triple time decay from three long options.
- Needs a big move to cover the large combined premium.
- Post-event volatility crush can cause losses even on a correct move.
Worked Example (Nifty)
Illustrative trade — lot size 75
Nifty 20,000. Buy 1× 20,000 CE ₹200 and 2× 20,000 PE ₹200 = ₹600 (₹45,000 max loss). Lower breakeven 19,700, upper breakeven 20,600. A fall to 19,400 makes the two puts worth ₹1,200, profit = (1200 − 600) × 75 = ₹45,000. A rise to 20,600 only breaks even — hence the bearish tilt.