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Jade Lizard : Part 2

Market Measures

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

The Market Measures segment from March 7th, 2016 called Jade Lizards : Part 1, revealed the results of our study that indicated managing winners at 50% of max profit was the best approach to use with this strategy. Today, we follow-up with a study indicating when a loss should be taken.

A Jade Lizard combines a short naked put and a short call spread. The Jade Lizard is essentially a Strangle with upside protection that eliminates the upside risk. The study we ran indicated we should manage winners at 50% of max profit. For the downside, we compared the percentage of profitable trades, average trade life (in days), and the average P/L per day to test the idea of managing losers (with virtually unlimited risk to the downside) at:

  • 1x Loss of Initial Credit Received
  • 2x Loss of Initial Credit Received
  • 3x Loss of Initial Credit Received
  • 4x Loss of Initial Credit Received
  • Holding the position to expiration

Watch this segment of “Market Measures” with Tom Sosnoff and Tony Battista for the valuable takeaways and the results from our study on managing Jade Lizards.

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