Jade Lizard – The Option Strategy Desk Reference

Jade Lizard

Strategy: Sell n OTM Calls, 56 DTE

Buy n OTM Calls, Higher Strike, Same Expiry

Sell n OTM Puts, Same Expiry

Example:

Price Chart: Neutral; may be experiencing a small upward trend.

Current IV%: 50%

IV Rank: 40 to 60

Trade: Sell n OTM call options; buy n OTM call options, higher strike; sell n OTM put options (all options at same expiration, 56 DTE).

Typical Strike Deltas:

Short Call 0.25

Long Call 2 strikes farther OTM than the short call

Short Put 0.25

Goals: This trade retains the premium collected when opened as long as both the short put and vertical bear call spread remain OTM.

Manage: If the price of the underlying security remains within a narrow range, let the options expire worthless. If a price rally or drop occurs that threatens the short put or the bear call vertical spread, close the vulnerable position and retain the safe position until it either expires worthless or can be closed for a profit.

Profit: Close when this strategy achieves a profit of 30 percent or more. If the options remain OTM, consider letting the trade expire worthless.

Loss: Close when a loss in premium value becomes 8 percent or less.