Best Reverse Jade Lizard option strategy in TCS

Best Reverse Jade Lizard option strategy in TCS

Hello friends, I hope you are doing well. I’m trying to share one option strategy every week. Today I’m sharing the Reverse Jade Lizard option strategy in TCS.

In this post, I’m sharing Thethe Reverse Jade Lizard Option strategy. How can we deploy this? and what should be our adjustments in this Option strategy?

What is the Reverse Jade Lizard Option Strategy?

This Reverse Jade Lizard option strategy has three legs. We are selling a deep OTM Call + Put and hedging our downside risk with one bought Put. All legs have an equal lot size. This strategy is the Reverse Jade Lizard Strategy. Look at the payoff chart:

Reverse Jade Lizard Option Strategy payoff chart

This strategy is a credit strategy and is always good when we are expecting a range-bound activity in the script. As you can see it has an Unlimited risk on the upside, so this strategy is only suitable for Advanced option traders who can manage it properly.

Let us take an example of TCS to understand the step-by-step process I’m following to initiate this Reverse Jade Lizard option strategy.

Steps to follow for the Reverse Jade Lizard option strategy

TCS Chart today

The first step to initiate the Reverse Jade Lizard option strategy is to find a stock that is traded in a range only. You can see after making a high of 3981.75, TCS is trading in a range of 3981 – 3420. So TCS can be a good script based on the first parameter.

Second step: Because this is a net Credit strategy, a stock with a high IV is preferable. TCS IVP (Implied Volatility percentile) is 92. This means 92% of time TCS IV was trading below the current IV in the last year (52 Weeks). So a high probability that Its IV will drop in the coming sessions will positively impact our credit spread.

Open Interest Analysis for TCS

Open Interest analysis for TCS

Now look at Open interest data, Highest OI stands at 3600 PE and 3800 CE followed by 3700 PE & 3900 CE. So based on the OI data: 3700 & 3600 can be the support levels whereas 3800 & 3900 are acting as the resistance levels. So we can use these levels as our range. The almost same range we are getting on the charts. So it’s our double confirmation that this range is valid based on current option chain data.

Reverse Jade Lizard option strategy in TCS

Reverse Jade Lizard option strategy in TCS

Based on the range we find in TCS, We are selling 3700 PE & 4000 CE and to manage downside risk we are buying 3600 PE. Now you can see that we don’t have any downside risk. But we have unlimited risk on Upside.

So to manage that risk you have to follow some adjustments if you find that TCS is approaching toward your sold 4000 Call option.

Possible adjustments

Once you find that the script is approaching your sold call strike means 4000, you can buy 4040 CE to lock your unlimited upside loss. Now when you have to do this adjustment? only if you find TCS above 3920.

You can join our Options Strategies – A Mentorship program to learn some these adjustments in a practical way.

I hope my articles are helping in your profitable trading. If you have any feedback or suggestions please type in the comment box. Your feedback will help me to do something better in the future.

Please type your queries related to this Reverse Jade Lizard option strategy in the comment box. I will try to answer all your queries.

Join Our Telegram Channel for FREE Option Strategies

Options Strategies-A Mentorship Program

Learn about trading options in a course led by an industry expert. It doesn’t matter how old you are, the mentorship program is open to everyone who wants to learn more about the various option trading strategies. You’ll learn everything you need to know about these strategies and more. Don’t wait; enroll today!

Click here for More Details

Much Check this also-

DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods.  This information should only be used by investors and traders who are aware of the risk inherent in securities trading.

Loading comments...