Strap

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Strap

A relatively simple trading strategy that involves buying a set of options, two calls and one put, with the same strike price and expiration date on a stock. The strap is a more focused version of the straddle, and is popular due to its unlimited profit, limited risk nature. The maximum loss that a strap can incur occurs when the equity price on the expiration date of the options is the same as the price on the date the options were purchased. In this case, the loss is equal to the sum the three-option set was purchased for. However, with any deviation in the price either up or down, the strategy recovers at least some of the cost of purchasing the options. See: Strip, Straddle

Strap

A bullish investment strategy in which an investor holds two calls and one put on the same underlying asset with the same expiration date and strike price. An investor uses a strap when he/she believes that the price of the underlying will increase substantially. If it does, the investor stands to make a substantial profit by exercising the calls. On the other hand, if the underlying decreases in price, the investor will not suffer a substantial loss because the strike price of the put protects him/her. See also: Call backspread ratio.

strap

A combination option made up of two calls and one put. The buyer of a strap profits from large variations in the price of the underlying asset, especially if it moves upward.
References in classic literature ?
The mate comes up, his arm strapped to his side, and stumbles into the cradle.
At noon the Babu strapped up his brass-bound drug-box, took his patent-leather shoes of ceremony in one hand, a gay blue-and-white umbrella in the other, and set off northwards to the Doon, where, he said, he was in demand among the lesser kings of those parts.
Standing on one leg three hours, to show off new-style strapped pants at 12 1/2 cents per leg per hour.
Two hours after his departure, however, his horse returned without him, and without the saddle-bags which had been strapped on his back at starting.
It was something that had puzzled his companion all the way in spite of what held him to more interesting riddles; it appeared to be several lengths of pole strapped together and wrapped up in paper.
His hands and feet were securely strapped together, and he bore over one eye the marks of a violent blow.
Among these on-lookers were three young men of a superior class, carrying small knapsacks strapped to their shoulders, and stout sticks in their hands.