Option Trading Strategy - Strip


Posted by: Invostock.com
Published on: December 07, 2023
Option Trading Strategy - Strip

The strip is a bearish options trading strategy that involves buying one put option and two call options with the same expiration date. The options should all have the same strike price. This strategy profits from a significant downward movement in the price of the underlying asset.

Here's a breakdown of the components of the strip strategy:

  1. Buy one put option: This provides the trader with the right to sell the underlying asset at a specified strike price.

  2. Buy two call options: These give the trader the right to buy the underlying asset at the same strike price as the put option.

The maximum loss for this strategy occurs if the price of the underlying asset remains unchanged or increases. The maximum gain occurs if the price of the underlying asset falls to zero.

Keep in mind that options trading involves risks, and it's important to fully understand the strategy and its potential outcomes before implementing it. Additionally, transaction costs and the impact of time decay (theta) should be considered when trading options.