Long Strip - A Great Bear Market Strategy [Part 1]

Over the weekend, we'd mentioned that we were going to provide a series of short educational articles this week, covering the Long Strip options strategy.

We'll start off the series with an illustration.

The Russell-2000 iShares (IWM) are trading at 35.00 at the moment. The fact that the ETF is sitting nearly precisely at a widely traded strike (as well as the fact that IWM options are amongst the most liquid options overall) means that this would not be a bad point at which to consider a strategy such as a Strip.

The technicals are as important of course and since this is not an educational piece on technical analysis per se, let's just say that the technicals basically point to the probability of a continuing bearish environment on the ETF for the next few sessions, but with the potential for a huge dead cat bounce, at any point. As we'll see later in the series, the Long Strip strategy would do well given either a continued drop or an abrupt bullish reversal.

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Long Strip - A Great Bear Market Strategy [Intro]

A large number of TheMarketMessenger.com Options Trading Picks over the past year have featured the 'Long Strip' options strategy. A vast majority of these picks have done extremely well and that is little surprise given that the Long Strip strategy is one that is perfectly catered to bear market situations.

Over the coming week, we're going to feature a few short options education articles that will provide a clear illustration of the Long Strip strategy, which intermediate and advanced options traders will recognize as a variant of the basic Long Straddle options strategy.

Long Strip (contrast w/ Long Straddle) options strategy - Basic Payoff Diagram (at expiration)

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