Jade Lizard Options Strategies in Small Accounts

[Music] falzia how are you i'm fine thank you vanetta what an honor i'm so excited to be on this show with you i am excited we are kicking off rolling trades season two electric boogaloo i am trying to expand my skills as a trader new year new me new skills um and so i thought i would start with you you have been a rising star on tastytrade and you were on the follow page how was your year 2020 in trading in trading it was excellent i'm i'm so relieved that i have this wonderful passion and interest to keep me busy and so a lot of people don't know you have been very active in tasty nation and especially with getting women interested in trading can you talk about that for a little bit yay girl power yes so i've always been i've always had this interest in helping women young or old with financial education financial literacy and of course to get interested in managing their own monies so tastytrade was a perfect fit for me once i started doing it successfully myself i just wanted to involve other women and i would notice that when i'd be in a public setting the women would often be sitting in the back they wouldn't raise their hands and ask questions and but they would follow me into the parking lot and ask me questions quietly and privately and i thought why is this and then you know i i've i've been in male dominated industries pretty much all my working life as an engineer and now as a trader and so i thought you know let's do something just for women and oh my goodness it just took off it's a place for them to feel comfortable not to feel threatened not to feel like any question is a stupid question because it's not and um and then i have to have to give thanks to liz and jenny they've been like benefactors so to speak because they talk about us on their shows and lo and behold they get off their show and i get like 10 requests for women so we're over 600 now wow wow and how can people find this this is on facebook yes it's on facebook it's called the women of tastytrade um it's very easy to find and all they have to do is answer a few questions and that's not a criteria for admission but just to give us a sense of where they are and um and then i always like to know where they're trading from because at last count we have women from about 15 countries oh wow and pretty much i would say all the states i have a a member who's helping me sort of tabulate where we are located so we can also form little local groups and coffee groups and dog walking groups and captioning groups and training of course you know so one of the things that i wanted to learn in uh 2021 is of course new trading strategies new ways to to manage and you mentioned liz and jenny and so taking a page from their book i've never done a jade lizard i like the sound of it um but i don't know what it entails i don't know when is a good time to do it so maybe walk me through what it is and when you would deploy that sort of strategy okay so i looked up a couple of underlyings and and certainly if you've got your favorites we can do it with them so do you want to um bring up your trading page okay falzia i have opened up my tastyworks uh what underlying uh which is the first underlying that you've looked at um i thought of melmo i i believe it's a chinese company m-o-m-o okay ivy rank is decent so that's one something we look for a jade lizard is a neutral to bullish strategy i like to just kind of glance at the chart to see where it's been and okay yeah so see it's kind of on its back so not a bad thing to be bullish on right right okay so if we go to the trade page and no earnings in sight so all our ducks are lined up um i'm going to february now because january only has 25 days and we usually start thinking about rolling around 20 days so i would suggest february so how about selling the 13 puts okay and then selling the 1516 call spread and then we can talk about what that entails okay so you get a dollar seven credit and if you wanna look at it on the curve page that would be great too you can change table to curve up at the top left there we go excellent so there you go no risk to the upside and the reason is because you've got a one dollar wide call spread and your credit of a dollar seven is covering that so you you know if it momo shot up to a million you would only pay a dollar to close that in the money call spread and you'd still keep seven dollars of your dollar seven credit okay so the thing that i look for in a jade lizard is where's my break even on the downside because all the risk is on the downside right and it's my short put which is 13 left the dollar seven credit which you know the credit gives you a little cushion or a buffer in the direction of your risk okay so our break even is around 12. yep and if you go back to the table view we can check what the delta is on the 12 put um yes right here negative 23. yeah so you know that's like there's a 23 chance that that 12 might be in the money so i'm pretty comfortable with that i like this one but you said you had some other ones so can you look at those just sure sure definitely so i on jd which happens to be another chinese company so february uh now this time because it's it's a pricier stock so i chose this to show you how you can buy a wing and limit your capital so we'll do a classic first so you sell the 75 put okay and then sell a two and a half dollar wide put spread at the and a half 90. okay so you have a two and a half dollar wide you're collecting 360 which means that the risk on your call site is completely covered right the maximum you would have to pay for that call spread if jd you know expired beyond 90 would be two dollars and fifty cents and you would keep a dollar ten okay does that make sense it does it does okay now the buying power is twelve hundred dollars yeah so we we have a way to fix that we buy a cheap long in the direction of the risk which means the risk is on our put side right yes so go ahead and buy the cheapest long possible that brings you to the buying power that you're comfortable with but just remember you only have a dollar tend to play with because you want to cover your call spread and your call spread is 250. so you can't spend more than um a dollar five right so how far into the puts can i go so i like to go as far as possible but i'm thinking not let's say try the 55 and see what the buying power does okay so now oh okay so you wanted to come in closer 60 i was like yeah it didn't do anything thousands and that's because the margin is better than the spread okay so you want to come into closer okay 65. yeah okay do you like 734 or is that yeah actually that's that's okay okay and our call spread is still covered 266 is more than 250. so vanetta where is your break-even now um so my breakeven now is 72 and a half here maybe right so it's always the short strike which is the 75 yes unless the credits you collect which is 266. okay so let's yeah so it's decent 72 and a half that is decent i always check yeah i always check the delta on the 72 and a half just you know it's about a 24 chance yeah yeah uncomfortable that's kind of how you want to look at it am i comfortable with the risk now there's nothing to say you can't move your call spread closer right now you have a pop of 70 percent you could move that you could move it to 85 and 70 87 and a half yeah okay added about 20 bucks to your net credits uh yes right now the value of these four contracts is 282 and as time passes it'll keep going down keep going down and as the volatility collapses it'll drop and we aim for a 50 profit so when it drops down to a dollar 41 we'd like to close it and i'm a big follower of liz and jenny in this regard also i like to put a gtc immediately okay for 50 yeah now you always have the choice you always have the choice to take it off earlier if you get and they have a little table i believe beef created it a long time ago but liz and jenny have it which tells you aim for fifty percent profit however if you get thirty percent profit say in five days take it and run like a thief in the night sure so put your gtc at 50 and then keep that table posted on your desk somewhere and if one of those conditions happen then go ahead and close it okay so we know that if it goes up we don't have a problem we are in fat city but if it goes down so some people put an alert at their break even which in your case is the 75 minus the 278. okay yes right yes and others put that alert at the strike itself that 75 strike okay personally i use the event okay because many times the underlying will bounce off we call it the probability of touch it'll bounce off that 75 and i don't want to be over managing and for your knowledge that chance is two times the chance of of that yeah so it's a 60 chance that it'll hit it okay right so at that point you have a choice that you can buy back your call spread which will now be essentially worthless okay because the stocks move so far away and you can resell another call spread right where the stock is okay so if the stock is at 72 and a half right you would just sell the 72 and a half 75 right okay okay so you've added more premium so you're basically helping the break even on the downside right yeah and you you haven't changed the character of your trade you still have no risk to the upside the thing could turn around and shoot back to 85 and you go fine with me i have no risk to the upside because my call spread is still two and a half dollars wide okay and then of course the last piece would be that if you want to continue in the trade you still feel bullish then you can roll out to the next expiration and continue you don't have to continue as a jade lizard you could continue as an iron condor gotcha gotcha okay yeah um i like how this sets up um should i try to get filled at 279 280 i would go for 280. okay let's go for a nice round number okay and see what happens it's working [Music] um before we exit out of this i don't know if you could help me um set the alert and and then yeah and a gtc so i opened up my position um what do i do now so you collect all four legs you know just like select them all so you get a pull down menu of choices okay yeah there we go and see it gives you a close at 50 profit just that the blue arrow to the right excellent okay there we go it fills it in and hit gtc gtc and then that's 140 that would be 50 and then just hit review and send yes absolutely okay and now go to positions yes thank you val you're welcome now to set the alert um bring up that side panel that you closed earlier top right hand corner of your screen right there that arrow that's pointing to the left yes yeah okay okay and now look down that vertical tab list and you'll see alerts oh alert oh there we go so where do you want to set your alert test time oh right at the not at the 75 we'll do it like the 72 and a half very good the short stretch okay good enough good enough so when jd uh so operator should be less than and yes just enter 72 and a half and there and hit create there we go so to summarize when i want to deploy a jade lizard it's in an underlying that has decent iv and that i am capping my risk to the upside right there's no risk to the upside there's no risk yeah okay the way you ensure that is that you make sure you collect credit that covers the width of the call spread okay and we see results uh with volatility contraction and with the passage of time absolutely time is your friend as a seller of premium time is always your friend and to help a jade lizard fit into your account no matter what your account size is you can always buy a wing further out to um to help with your buying power exactly and then you know that you can't spend more on that willing that takes away from that credit you've collected right gotcha yeah and uh for day-to-day management we put in a gtc order to manage at 50 hopefully that we it's always working we hope to collect 50 but as our handy chart said if we get a higher percentage within a shorter number of days we could certainly manage our winners early and we also put in alert if our uh short strike uh if our break even if our break even got breached you got that very good vanessa that's excellent welcome to the world of training thank you so much for your time people can follow you on the tastyworks follow page uh also in the facebook uh women of tastytrade uh and you are on twitter as well yes yes yes perfect fawzia thank you so very much for being here you're welcome take care thank you vernetta i closed the trade on january the 8th for a 2.16 debit netting me 64 cents or 64. in this trade it was about 23 of max profit due to the holidays we lost some trading days between when i entered the trade and took it off so let's say the trade was on for around 10 days so 25 profit in 10 days is not bad also i did have lingering concerns about news coming out about the availability of chinese stocks trading on the u.s market and i wanted to avoid that plus jd did seem weirdly strong still trading above that 90 level and using my curve view if jd had expired at that 90 level above my call spread i only would have netted 30 so i was happy to take 64 out of this trade not bad for my first jade lizard you

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Id: esssdDDKICE

Length: 18min 57sec (1137 seconds)

Published: Sun Apr 11 2021