Similar to a straddle but with a stronger bearish bias achieved by purchasing twice as many puts. The stock must move in order to generate money, but it will now profit more from a downward movement than from an upward one.
Description
If the price of the underlying security falls significantly, the value of the two put options that have been sold will increase, and the trader can profit by buying back the options at a lower price. If the price of the underlying security remains relatively stable or rises, the options will expire worthless, and the trader will keep the premium collected from selling the options.
Selling two put options and one call option on the same underlying security with the same expiration date. This is also known as a bearish strip. The goal of a strip strategy is to profit from a decline in the price of the underlying security.
Breakeven
the strike price of the call option minus the premiums collected from selling the put options.
Sweetspot
Stock price goes way down
Max profit
Unlimited. Equal to the premium collected from selling the put & call options
Max loss
Limited to the net debit paid
