Strap Options - Two Different Ways to Trade Directional Volatility

Strap options are designed for traders who expect a big move but aren’t sure which direction it will go. Should you go with more calls or more puts? How do you choose between a bullish or bearish lean? This article breaks down the option strap and how each strap option strategy works.

Key Takeaways

• Strap options are a flexible strategy with two versions: one with more calls for bullish lean, one with more puts for bearish lean.
• An option strap is designed to profit from big moves in either direction, but the skew (calls vs puts) lets you express a bias.
• A strap option strategy is ideal in volatile situations like earnings or market events where direction is uncertain but movement is expected. However, a drop in implied volatility will hurt the trade.

What Is a Strap Option Strategy?

A strap option strategy is built for volatility. It involves buying three options at the same strike and with the same expiration: two on one side (either calls or puts) and one on the other. That’s it. You’re not trying to guess the direction with certainty, just the strength of the move, with a small directional lean.

When you buy two calls and one put, you’re using a call-heavy strap. This version profits more when the price goes up. If you flip it and buy two puts and one call, it’s a put-heavy strap, which leans bearish. Either way, you’re covered on both sides, but with extra exposure where you expect the bigger move.

Strap options are a modified version of the classic long straddle. A regular straddle has one call and one put, which makes it totally neutral. The strap adds a directional edge without giving up the flexibility to profit in both directions.

Here’s how a basic strap setup might look:

• Buy 2 at-the-money calls
• Buy 1 at-the-money put
• Same strike, same expiry, same underlying

Or, for a bearish version:

• Buy 2 at-the-money puts
• Buy 1 at-the-money call
• Same rules apply

The typical long strap P&L chart will look as follows:

Since you’re buying three contracts instead of two, the total cost of the trade is higher than a regular straddle. All else equal, more premium means a wider breakeven range.

The risk is capped at the total premium paid. If the stock goes nowhere, all three options expire worthless and you lose what you paid upfront. But if the move is strong enough, the upside is potentially unlimited. Every dollar move in your favor adds up quickly, especially on the two-option side.

Notice that, while we won’t focus on it, there’s also a short version of this strategy. The short strap option strategy involves selling three options: either 2 calls and 1 put for a bearish tilt, or 2 puts and 1 call for a bullish lean, as you can see from the P&Ls below:

The short version profits if the underlying stays near the strike. Risk is high if the move is strong, especially in the skewed direction.

Long Strap Options With Calls - Bullish Tilt

This version of the strap option strategy leans bullish. It involves buying 2 at-the-money call options and 1 at-the-money put, all with the same strike and expiration. You’re paying for three contracts, but you get a setup that benefits from movement in either direction, with stronger gains if the price goes up.

The logic is simple: if the stock rallies, both calls gain value. If it drops, the put helps recover some of the cost, but your upside is slower on the downside than it is on the upside.

This makes long strap options with calls a smart choice when:

• You expect a sharp move
• You believe it’s more likely to go up than down
• But you still want protection in case you’re wrong

The payoff is asymmetric. Every dollar higher adds two points of profit (one for each call), while every point lower adds just one (from the put). Traders often use this version of the strap option strategy before earnings or major events when upside surprises seem more likely, but downside risk is still on the table.

Example: Long Strap Option Strategy With Calls

Suppose AMZN trades at $208.64 and you expect a big move, likely upward. You buy 2 $210 calls and 1 $210 put. With this strap options setup, you have the following P&L profile (as found on our screener for options trades, through the custom scan feature):

You basically risk $1,500 if AMZN finishes near $210. You profit below $195.2 or above $217.4, with gains accelerating faster on the upside.

Long Strap Options With Puts - Bearish Tilt

This version of the strap option strategy flips the bias. You buy 2 at-the-money puts and 1 at-the-money call, using the same strike and expiration for all three. Like other strap options, it’s designed to profit from a big move. But in this case, the setup leans bearish.

The put-heavy structure makes it ideal when you expect volatility, but you think the drop is more likely than a rally. It’s not a full-on directional bet though, since the long call gives you a cushion if the price moves up instead.

The payoff is skewed:

• Every point down adds two points of profit
• Every point up adds one point from the call
• If the stock doesn’t move, you lose the full premiums

This kind of option strap works well when markets look weak but are still unpredictable (for example, heading into disappointing macro data or earnings from a fragile stock). It gives traders who lean bearish a way to stay flexible without abandoning upside coverage.

Example: Long Strap Option Strategy With Puts

Suppose AMZN trades at $208.64 and you expect a sharp drop. You buy 2 $210 puts and 1 $210 call, with this strap options setup:

You risk over $1,500 if AMZN closes near $210. You profit below $202.18 or above $225.65, with gains growing faster on the downside.