A Strap Option Strategy is a Bullish Alternative Trade Strategy that also makes room for profits when the market goes down, but with a more possible reverse advantage. It is used when a merchant expects high volatility in the market, with a strong belief in value movement on one upwards.

How Does the Strap Option Work?

A lease is a modified version of the Long Place Straddle strategy, but with a bullish twist. While a standard scattered involves buying a call and a set, the lease involves buying two call options and a PUT option, all with the same strike price and expiration date. This setup increases your exposure upwards for price movements because you have more call options than sets. The logic behind the strategy is that if the property increases significantly, the two call opportunities will make double profits compared to the single item if the property moves downwards.

A Strap is a modified version of the straddle strategy. In a strap, the trader buys:

• 2 Call Options (for quick bullish view)
• 1 put Options (for bearish view)
• All Options have the same strike price and uniform notice Date.

When to Use a Strap Strategy?

Use the strap strategy when:

• You expect the stock/index to move significantly in either direction.
• You are more confident about a rise than a fall.
• You want to limit your losses in case the market stays flat.

Advantages of Strap Option Strategy

• The benefits of instability in both directions

• High gain capacity on the reverse

• Limited Loss (Premium Payment only)

Risks

• If the stock stays near the strike price, you may lose the entire premium.
• Strategy is expensive due to three option premiums.

Conclusion

Strap Option Strategy is ideal for traders who expect major movements in the market, especially upwards. This is a smart way to reduce the risk of keeping the door open for large profits. Use it with care, especially in unstable events such as earnings, budget, or global news.

Read Also

What should everyone know about options trading
How to Use Covered Calls to Earn Passive Income