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Strap
eitherwaysThe Strap is high volatility strategy with more bias towards Upside
Example:
| Instrument | Qty | Price |
|---|---|---|
| BUY NIFTY 21-Jul-26 24100 CE | 130 | 119.15 |
| BUY NIFTY 21-Jul-26 24100 PE | 65 | 135.9 |
When To Execute?
Strap is neutral to bullish Strategy. You are looking for increasing volatility with the stock price moving explosively in either direction, preferably to the upside
Trade
Buy 2 lots ATM Call and 1 lot ATM Puts with same expiration. Strategy is expensive compare to Straddle and it requires explosive move mostly on upside.
Advantages
With Neutral to Bullish outlook, one can participate in either ways surge in volatility preferably volatility on Upside. Ideal to trade when implied volatility is at lower end, lower option prices and is expected to increase exponentially with bias on upside
Disadvantages
Time decay is harmful to Strap. Time day accelerates exponentially in last week of expiry. Cost to establish Strap is significantly high. If stock fails to give desired move, one can lose the premium
Maximum Profit
Maximum Profit is unlimited. However profit is more skewed on upside as we bought double the number of Calls. Profitability improves at double the speed on upside. The BEP to the downside is the strike minus the net debit, which is more than the Straddle because we�ve bought double the amount of Calls
Maximum Loss
It is Net debit Strategy as you have bought both Call & Put. Strap is more expensive than usual Straddle for the extra Call it possess