$PINS 'JADE LIZARD'
One neutral/ bullish strategy is a 'Jade Lizard', which is combining a short put with a call credit spread. The idea is that the premium credit from the short put is sufficient to cover the max loss of the call credit spread. And in doing so, the jade lizard setup has no risk to the upside. One thing that is nice about the jade lizard, compared to the short iron condor, is that if the share price falls and triggers assignment on the short put, the trader now possesses something to show for their troubles, namely shares, which they can now use to sell calls in order to get back to breakeven or profitability. With an iron condor, once you take your loss you can't do much about it, except for rolling the losing side into an even riskier credit spread further out. Of course the counter argument is that the holding the shares from a short put could be riskier overall than walking away from the defined risk of a credit spread. In any case, it would be wise to pick a stock, like $PINS, that is expected to fare okay in the current market.
If the call credit spread is violated and the short call is in the money, the trade will need to be closed manually before close on expiration day.
--If the share price is $31 or higher on 5/5, the total profit will be $22.
--If the share price is between $25 and $30 on 5/5 the total profit will be $122 (the original credit).
--If the share price is $25 or lower, the short put will be assigned and the next step will be to sell calls.
$31 Call 5/5 buy
$30 Call 5/5 sell
----
$25 Put 5/5 sell
Filled order credit $122.
Collateral $2,500 for short put.
One neutral/ bullish strategy is a 'Jade Lizard', which is combining a short put with a call credit spread. The idea is that the premium credit from the short put is sufficient to cover the max loss of the call credit spread. And in doing so, the jade lizard setup has no risk to the upside. One thing that is nice about the jade lizard, compared to the short iron condor, is that if the share price falls and triggers assignment on the short put, the trader now possesses something to show for their troubles, namely shares, which they can now use to sell calls in order to get back to breakeven or profitability. With an iron condor, once you take your loss you can't do much about it, except for rolling the losing side into an even riskier credit spread further out. Of course the counter argument is that the holding the shares from a short put could be riskier overall than walking away from the defined risk of a credit spread. In any case, it would be wise to pick a stock, like $PINS, that is expected to fare okay in the current market.
If the call credit spread is violated and the short call is in the money, the trade will need to be closed manually before close on expiration day.
--If the share price is $31 or higher on 5/5, the total profit will be $22.
--If the share price is between $25 and $30 on 5/5 the total profit will be $122 (the original credit).
--If the share price is $25 or lower, the short put will be assigned and the next step will be to sell calls.
$31 Call 5/5 buy
$30 Call 5/5 sell
----
$25 Put 5/5 sell
Filled order credit $122.
Collateral $2,500 for short put.
Trade active:
The assignment was worth it and then some. Currently have a $30 short call in progress for the 8/18 expiration. Current average cost @ $2235 of 100 shares.