Mastering Options Trading with the Jade Lizard Strategy: Trade Examples Included!
64 you’re an options trader looking to expand your trading arsenal, the Jade Lizard strategy is worth considering. This unique strategy combines aspects of a short put, a short call, and a long call to potentially profit from both bullish and neutral market conditions. In this article, we will explore the ins and outs of the Jade Lizard strategy, along with real trade examples, to help you understand how it works and how it can be implemented in your options trading.
What is the Jade Lizard Strategy?
The Jade Lizard strategy is a combination of three options trades: a short put, a short call, and a long call. It involves selling an out-of-the-money (OTM) put and an OTM call, while simultaneously buying a further OTM call. The goal of this strategy is to generate a net credit by collecting the premiums from the sold options, while limiting the potential losses.
Trade Example 1: Bullish Jade Lizard
Let’s consider a bullish scenario where a stock is trading at $100. Here’s an example of a Jade Lizard trade:
- Sell an OTM put: Sell one put option with a strike price of $90 for a premium of $2.
- Sell an OTM call: Sell one call option with a strike price of $110 for a premium of $1.50.
