Strip

A strip is an advanced three-leg volatility strategy that combines the characteristics of a straddle with additional bearish bias, making it ideal for traders expecting large price movements with higher probability of downward direction. This sophisticated strategy involves buying one at-the-money call and two at-the-money puts, creating a position that profits from significant price movement in either direction but provides enhanced profit potential from downward moves due to the extra put position. The strategy is particularly effective before earnings announcements, economic releases, or other events where substantial price movement is expected with potential bearish bias or crash protection needs. Professional traders use strips when they expect high volatility but have slight bearish conviction or want enhanced downside protection, making it suitable for portfolio hedging applications. The strategy requires higher capital investment than traditional straddles but offers superior profit potential in bearish scenarios while maintaining upside participation through the call position. The extra put provides amplified downside leverage, making it effective for tail risk hedging strategies

If NIFTY is at ₹25,800, set up: Buy ₹25,800 Call for ₹120, Buy two ₹25,800 Puts for ₹110 each, creating ₹340 total investment with enhanced downside profit potential below ₹25,460 and upside participation above ₹26,140.