Strap

A strap is an advanced three-leg volatility strategy that combines the characteristics of a straddle with additional bullish bias, making it ideal for traders expecting large price movements with higher probability of upward direction. This sophisticated strategy involves buying two at-the-money calls and one at-the-money put, creating a position that profits from significant price movement in either direction but provides enhanced profit potential from upward moves due to the extra call position. The strategy is particularly effective before earnings announcements, product launches, or other events where substantial price movement is expected with potential bullish bias. Professional traders use straps when they expect high volatility but have slight bullish conviction, wanting to maintain volatility exposure while tilting the position toward potential upside acceleration. The strategy requires higher capital investment than traditional straddles but offers superior profit potential in bullish scenarios while maintaining downside protection through the put position. Risk management involves monitoring time decay and volatility changes as expiration approaches

If NIFTY is at ₹25,800, set up: Buy two ₹25,800 Calls for ₹120 each, Buy ₹25,800 Put for ₹110, creating ₹350 total investment with enhanced upside profit potential above ₹26,150 and downside protection below ₹25,450.