Best Practices

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The Lizards

Best Practices

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

On today’s episode of “Best Practices,” Tom Sosnoff and Tony Battista examine Jade Lizards and Big Lizards.

The difference between Jade Lizards and a Big Lizard is explained. A Jade Lizard is a short strangle combined with a long OTM call. A Big Lizard is a short straddle combined with a long OTM call. The Big Lizard obviously collects more premium.

There are two things to look for when placing a Lizard. The first is a High IV/IV Rank of the underlying. The second is a neutral or bullish outlook on the underlying. The choice between the two Lizards will decide how aggressively we manage a winner with the Big Lizard being managed more aggressively. It is important to note that these positions provide more protection than just a naked put.

An example of a Jade Lizard is shown. The strikes and total credit are given and the lack of upside risk is demonstrated. The differences between Lizards and an Iron Condor or an Iron Butterfly are discussed. Also examined is under what circumstances one would want to flip the Lizard and buy the OTM put instead of the OTM call.

Watch Tom Sosnoff and Tony Battista on this episode of "Best Practices" for an explanation of Jade Lizards and Big Lizards and the benefits of using them rather than Iron Condors and Iron Butterflies.

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