A brokerage house practice of separating a bond into two separate securities: a principal portion (PO) and an interest portion (IO). A variation known by the acronym "STRIPS" (Separate Trading of Registered Interest and Principal of Securities) is a stripped zero-coupon bond that is a direct obligation of the U.S. Treasury. Other strips include Treasuries stripped by brokers, such as TIGERS, and Salomon Brothers' tax-exempt M-CATS.
(1) Option strategy: a combination of two puts and one call options of the same series, with the same underlying security, exercise price and expiration date. A strip strategy may be used by a trader who thinks that a large stock price movement is imminent, but believes that a decrease in stock price is more likely than an increase; (2) Separate Trading of Registered Interest and Principal of Securities: process by which a bond is separated into its corpus and coupons, which are then sold separately as zero-coupon securities.
A U.S. Treasury-sanctioned brokerage house practice of separating a bond (which is held in trust) into its face value and coupons, that are then sold separately as zero coupon bonds.