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

# Strap

**Section**: 2.34 | **Asset Class**: Options | **Type**: Volatility

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

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

Net debit: D

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

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

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

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