---
description: "A bearish volatility strategy buying one ATM call and two ATM puts at strike K, profiting more from a downward move than an upward move of equal magnitude."
tags: [options, volatility, bearish, strip]
---

# Strip

**Section**: 2.35 | **Asset Class**: Options | **Type**: Volatility

## Overview
The strip is a volatility strategy consisting of a long position in one ATM call option and a long position in two ATM put options with strike K. This is a net debit trade. The trader's outlook is bearish (skewed toward downside). This is a capital gain strategy that profits from a large move in either direction but gains more from a downward move.

## Construction
- Buy 1 ATM call option at strike K
- Buy 2 ATM put options at strike K, same expiry

Net debit: D

## Payoff Profile
f_T = (S_T - K)+ + 2 × (K - S_T)+ - D

- Upper breakeven: S*_up = K + D
- Lower breakeven: S*_down = K - D/2
- Max profit: P_max = unlimited  (especially strong on downside due to 2 puts)
- Max loss: L_max = D  (if S_T = K at expiry)

## Key Conditions / Signals
- Bearish but uncertain of direction; expects a large move with downside bias
- Low implied volatility environment is ideal (cheaper debit to enter)
- The lower breakeven (D/2 below K) is closer to K than the upper breakeven (D above K)

## Notes
The strip is a modified straddle with bearish skew: two puts vs. one call. The downside potential is doubled relative to the upside (per unit of move). Maximum loss is capped at the net debit D.