Most Traders Build the Jade Lizard Wrong. Here's the 70-30 Rule.

A viewer asks the question everyone eventually asks about the jade lizard: if the credit covers the call spread, where is the risk actually hiding? The answer is that it is all on the downside. The trade contains one naked short put, so functionally you are selling a put at an inflated volatility, and if the stock falls you either take the shares or roll it. The desk also corrects how the trade gets built. A true jade lizard takes roughly a third of its credit from the call spread and two thirds from the put, placed as far out as the market allows. Slide that call spread in near the money and you no longer have a neutral trade, you have a bearish one. They prefer it over a strangle in names that have already been beaten down, where a sharp snap-back rally would punish a short call, and they avoid it in names sitting at the top of their range. This is education, not a recommendation. 📊 tastylive: https://www.tastylive.com/ 📰 Get Tom's pre-market analysis every morning: https://www.tastylive.com/newsletters 📘 FREE Options Strategy Guide: https://tinyurl.com/bp9ms763 📱 Follow tastylive on X: https://x.com/tastyliveshow Chapters 00:00 Where is the risk actually hiding 00:13 It is a naked short put 00:40 Selling a put at inflated volatility 00:57 When it beats a strangle 01:10 The rubber band rally problem 02:06 What a true jade lizard looks like 03:02 The mistake that makes it bearish 03:29 There is no free lunch 04:07 Setting one up on the platform #tastylive #jadelizard #optionstrading #shortput #volatilityskew #optionsstrategy #strangle #riskmanagement #optionsbasics #optionseducation tastylive is a real financial network, producing hours of live programming every day. Follow along as our experts navigate the markets, provide actionable trading insights, and teach you how to trade. With over 120 original segments, and over 25 personalities, we'll help you take your trading to the next level, whether you are new to trading or a seasoned veteran. tastylive content is created, produced, and provided solely by tastylive, Inc. ("tastylive") and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read all applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange Traded Options Risk Disclosure Statement found at https://tastytrade.com/disclosures/. Past performance is not indicative of future results. Performance is not presented net of all commissions, fees, and expenses. Multi-leg option strategies incur higher transaction costs than single leg trades as they involve multiple commission charges. Examples provided are for illustrative, informational, and educational purposes only and are not intended to be reflective of results you can expect to achieve. Supporting documentation for any claims, including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.