Options Strategy?

This popular technique combines a short put and a short call spread.
Experienced options trader are the one who has reserved exotic option strategies, but beginner traders can employ them as well, but if they are able to associate risks too. After all, if you think very deeply then you will be able to find out that so-called exotic option strategies are nothing more or less than plain-vanilla options structured in a way to express a market viewpoint. 

The Jade Lizard is one of the most popular options trading strategies. It's a very simple move that is usually best suited for a trader who has a neutral to the bullish outlook for a given security and when markets are moving sideways and range-bound, but keep in mind that it has the potential to move higher. Overall, The Jade Lizard strategy is used to combine a short put and a short call spread.

For the purpose of making you understand Jade Lizard more clearly we would like to give you a real-life example that will help you in implementing it for your own trading.

What is a Jade Lizard Strategy?

To make money out of the stock market some people use the technique which is known as Jade Lizard. This technique is used by traders when they think that price will eventually stay on its place or might go up a little bit.

In this strategy, traders are used to usually use a special trade using options. Options are like special agreements to eventually buy or sell stocks at a certain price. The goal of the Jade Lizard strategy is to make money from the option prices.

How Does the Jade Lizard Strategy Work?

Just imagine that there is someone who likes a company's stock and its cost is $45 in the process of making money from stock they use the Jade Lizard.

First of all, they are usually used to sell an option that says its price is not going down to $45. At the same time, they sell two more options which is used to say the stock's price will not go higher than $52 or $53. 

They are used to get money mainly for selling these options. And if by any chance they get more money than higher options cost, but only if they're in a good position.

Possible Outcomes

• Best Outcome:

If by any chance the stock's price stays between $45 and $52, then they might keep the money they got for the options.

• Not-So-Good Outcome:

If by any chance the stock's price goes higher than $53, then there are some chances because of which they might lose some money. But they are used to keep the money they get from the stock.

• Worst Outcome:

If by any chance the stock's price goes really low, then it's possible that they might have to buy at the stock at $45, even if it's worth less. And this is a risk they need to manage anyhow.

Important Points to Remember

The Jade Lizard strategy is mainly good when you think that a stock is not going to change too much in price then you can easily make money by selling options by using this strategy.   

If by any chance the price falls then you have to buy the stock at a higher price even if it falls a lot.

Why is it Called Jade Lizard?

They call it Jade Lizard because the way it makes money looks like the shape of a lizard with a long tail.

Well if we put it in a simplified manner then it makes money it looks like a lizard with a tail in the chart and that's why it is known as Jade Lizard.

Can You Stop Before It Ends?

Yes, it's very simple but you have to close every single part of trade.

How to Choose the Prices?

Observation is the key element here so you have to see that how the stock price has been moving recently. If the price is not going too much up or down then this strategy might help you in a major way. 

In Simple Words

In simple words Jade Lizard strategy is a way to make money from a stock that is not changing a lot. In this strategy, you sell options and hope that the stock stays in a certain price range. If it does, you will be able to keep the money. But if by any chance the price changes too much then risks can get higher. It's important to be very careful and manage those risks.  

Conclusion

The information provided in this blog is for educational purposes only and should not be considered financial or investment advice. Trading in stocks and securities involves risks, and individuals should carefully evaluate their financial situation and consult with professionals before making any trading decisions, you can take the help of Finskool advisory service which will increase your chances of earning profit.