Strip Strategy

A straddle is 1 call + 1 put (neutral bias). A strip is 1 call + 2 puts (bearish bias). The strip costs more but profits twice as much from downside moves.

No. Your maximum loss is limited to the total premium paid for all 3 options. This is a defined-risk strategy.

A strip still profits if the stock rallies (via the call). If you're bearish but uncertain, a strip gives you upside exposure too. Pure puts lose everything if the stock rises.

Yes! Strips consist entirely of long options (defined risk), which are permitted in TFSA and RRSP accounts.

You profit when the stock moves significantly in either direction, but you profit MORE from downside moves. You need the stock to move beyond the breakeven points to be profitable.

Upper breakeven = Strike + Total Premium. Lower breakeven = Strike - (Total Premium / 2). The lower breakeven is closer because the 2 puts generate double profit on downside moves.

Theta is your enemy. With 3 long ATM options, theta decay is approximately 1.5× that of a straddle. You need the stock to move to offset this decay. Monitor daily and don't hold too long without movement.

IV crush hurts all 3 long options. Even if the stock moved, IV crush can significantly reduce your gains. Exit quickly after events (within 24-48 hours) to capture the move before IV crush erodes value.

ATM is standard and provides maximum gamma. OTM options lower cost but require a bigger move. For most strips, ATM strikes at the same price work best.

Take profits at 50-100% of premium paid. Don't get greedy. Consider closing one put to lock in partial profits while leaving some upside/downside exposure. Time decay accelerates as you hold.

As the stock moves and your delta changes, trade stock against the position. If stock drops and delta becomes more negative, buy stock to capture gamma profit and reset delta. This extracts value from large moves while maintaining the strip structure.

Generally below 30% IV Rank. This means options are relatively cheap and there's potential for IV expansion to add value. Above 50% IV Rank, strips become expensive and IV crush risk is high.

Size based on portfolio beta. Calculate the strip's profit at various market decline levels and match to your portfolio's expected loss. The 2× put leverage makes strips efficient crash hedges, but remember they cost premium that decays.

3:1 strip (3 puts + 1 call) for extreme bearish bias. Calendar strip (sell near-term, buy far-term) for reduced cost. Split-strike strip for customized breakevens. Each variation has different cost and Greek profiles.

Break down P&L into: delta contribution (stock movement), gamma contribution (acceleration), theta contribution (time decay - usually negative), and vega contribution (IV changes). This helps identify whether your thesis or timing was the issue.