#jade lizard

Jade Lizard #OPTIONTrade on $YHOO for ThetaForums.com

This trade covers the “Jade Lizard” Trade, with a slight twist, of a further out-in-time long call. This creates an opportunity for a roll of the short put and short call, if needed.  I’ve done these trades with LEAPS with varying degrees of success.  This only goes out a month, which is more consistent of a Calendar Spread (basically, it’s just now a diagonal on the call side versus a vertical)

Tastytrade.com #Video: Are There Benefits to Defining your Risk on #OPTIONS #TRADES?

The question posed is, “From a capital usage standpoint, is there added benefit in defining a naked component of a trade?”

Tom and Tony considered a Jade Lizard where the naked put has “undefined risk” to the downside.  Is there a way for us to limit this doeside risk and capital requirement while maintaining a reasonable return on capital?

The discussion addresses if someone should make a skewed…

I was listening to the Back to Cool radio show on the Tastytrade network, and they were discussing the Jade Lizard strategy.   I picked up a few more tidbits about this unique option strategy that will help me visual and execute this trade.  Here are the few notes that I picked up.

Its Like an Iron Condor with out the dowside protection

Its Like a Short Strangle with an Upside protection 

An entry criteria for a Jade Lizard is that a stock's options should have a current IV percentage greater than or equal to 50%

My current plan is to find stocks with high IV profiles such as NQ mobile and also to trade this strategy through an earnings period.   This week's candidates are NKE, ACN, and BBRY. 

From: 

The Jade Lizard - A great new High Implied Volatility strategy that I found perusing the Tasty Treat You Tube area.  I will definitely trade this strategy. 

Here are my notes:

A Jade Lizard is a combination of selling an OTM Put and an OTM Call Spread

Needs to be done in periods of high volatility

Its a Skew Strategy taking advantage of the higher IV's of the puts, as well as the skews between the call strikes(lower strike calls have higher IV than higher strikes). 

IV needs to be over 50%

Credit needs to be greater than the width of the call spread to Setup for no risk to the upside

Management:  Go for 25% Max profit due to great AVG P/L per Day, More Winners

The market keeps on soaring higher and higher hitting all time highs for the S&P and Dow 30.   Is this sustainable?  Are we in a credit bubble?    The Fed will keep on pumping bond liquidity in the market keeping Interest Rates artificially low.   In this environment, money will continue to flow into equities, particularly dividend paying stocks to get that investment yield.  

Future Fed Chairman Janet Yellen will most likely continue this low interest rate policy until the economy shows strong job and GDP growth.   The Fed will not likely taper from their bond liquidity policy until at least March 2014, but many of the talking heads on CNBC think it will be much longer and possibly into 2015 as the economy works to reduce the 7 plus percent unemployment rate.   Will the market finally crash once the tapering begins?   Will another catalyst or event cause the market to crash? 

While I have the time, I will be preparing for the inevitable crash or massive correction with Option Strategies thriving in High Implied Volatility environments.  I will be looking for stocks with high implied volatility to begin practicing these strategies as to prepare when all stocks will have high implied volatility caused by a crash, similar to the 2008-2009 financial crisis.    Here are the strategies that I will be looking at:

1.  Short Ratio Spreads - Use a 1x2 Put Spread or 2x3 Put Spread to be a net seller. Use on stocks that I would eventually want to own due to the net short naked put.  

2.  Iron Cockroaches - A Random Walk Trading specialty!  

3.  The Jade Lizard - Will post a video from Tasty Trade where I learned this unique options strategy.  

4.  Broken Wing Butterfly - Should I only execute this trade on the SPX and RUT or expand to stocks?  

5.  Risk Reversal Call Spreads - Use this when I try to time the bottom, and use this strategy on stocks that I want to own due to the selling of a naked put. 

6.  The Christmas Tree - This is similar to a Short Put Ratio backspread but instead of selling 2 of the same strikes, you buy one near ATM Put, sell a lower OTM put, then sell an even lower OTM Put to form a "Christmas Tree" risk graph look.