Jade Lizard

What is a Jade Lizard?

A jade lizard is a three-leg options strategy where you sell a put, sell a call, and buy a higher call. The short put collects premium below the market. The short call spread (sell call + buy higher call) collects premium above the market. The key feature is that if the total credit collected exceeds the width of the call spread, you have zero risk to the upside.

Think of it as an iron condor without the long put — but only when the credit is large enough to eliminate upside risk. Your only risk is on the downside, below the short put strike.

How to Set It Up

• Sell 1 OTM put below the current price
• Sell 1 OTM call above the current price
• Buy 1 further OTM call above the short call
• Same expiration for all legs
• Critical rule: The total credit collected must be greater than or equal to the width of the call spread. This is what eliminates upside risk.
• Strike selection: Choose the put strike where you would be comfortable owning shares. Choose the call spread at strikes above where you expect the stock to go.
• Expiration: 30-45 days out for optimal time decay.

If the total credit is less than the call spread width, you still have upside risk and the trade is just a short put plus a bear call spread.

When to Use This Strategy

Use a jade lizard when:

• You are neutral to slightly bullish
• Implied volatility is elevated, making premiums rich
• You want premium from both sides but with no upside risk
• You are comfortable with undefined risk on the downside (like selling a put)
• You prefer a simpler structure than an iron condor

Jade lizards are popular in high-IV environments where the rich premiums make it easy to collect enough credit to eliminate the upside risk.

Example Trade

Stock XYZ is trading at $100. IV is elevated.

• Sell 1 XYZ $95 put for $2.50
• Sell 1 XYZ $105 call for $1.80
• Buy 1 XYZ $110 call for $0.80
• Total credit: $2.50 + $1.80 - $0.80 = $3.50 ($350 collected)
• Call spread width: $110 - $105 = $5.00

Since the $3.50 credit is less than the $5 call spread width, we do still have some upside risk. Let us adjust:

• Sell 1 XYZ $93 put for $2.00
• Sell 1 XYZ $107 call for $1.30
• Buy 1 XYZ $110 call for $0.80
• Total credit: $2.00 + $1.30 - $0.80 = $2.50 ($250 collected)
• Call spread width: $3.00

Close enough. With the credit at $2.50 vs. $3 call spread width, upside risk is only $50. In high IV, you can often get the credit to exceed the call spread width entirely.

If XYZ stays between $93 and $107: All options expire worthless. You keep $250.

If XYZ goes to $115: The call spread maxes out at $3 cost, but you collected $2.50. Net loss on upside: $50 max.

If XYZ drops to $85: The put is worth $8. Loss: $800 - $250 credit = $550 loss. This is where the real risk lives.

Risk and Reward

• Max profit: Total credit received. $250 in our example. Achieved when the stock stays between the short put and short call.
• Max loss: On the downside, (put strike - credit) x 100 if the stock goes to zero. On the upside, (call spread width - credit) x 100 — ideally zero.
• Breakeven: Put strike minus total credit. $93 - $2.50 = $90.50 in our example.

The beauty of the jade lizard is the asymmetry: no upside risk (or minimal) with full premium collection from both sides.

Tips and Common Mistakes

• Always check that the credit exceeds the call spread width. This is the defining feature of a jade lizard. Without it, you just have a short put plus a bear call spread.
• The downside risk is real. Treat the short put like any naked put — only sell on stocks you would own.
• Manage at 50% of max profit. Close when you can buy the whole position back for half the credit received.
• Avoid earnings and catalysts. A big gap down destroys the trade.

Related Strategies

• Iron Condor — adds a long put for defined risk on both sides
• Short Put — the standalone put component
• Bear Call Spread — the standalone call spread component