Jade Lizard
Sell an OTM put and an OTM call spread so the total credit exceeds the call-spread width — removing all upside risk.
What is a Jade Lizard?
A Jade Lizard combines a short OTM put with a short OTM call spread (sell a call, buy a higher call). The key rule: collect a total credit greater than the width of the call spread. When you do, there is literally no risk on the upside — even an unlimited rally cannot lose money, because the leftover credit covers the capped call-spread loss. Risk remains only on the downside, below the short put. It is a popular high-probability income trade for a neutral-to-bullish, elevated-IV environment.
Payoff Diagram
Profit & Loss at expiry
Per share (multiply by lot size 75). Gold dots mark breakeven points; green = profit, red = loss.
Construction
- Sell 1 OTM Put.
- Sell 1 OTM Call and Buy 1 higher OTM Call (a bear call spread).
- Ensure total credit ≥ width of the call spread → no upside risk.
When to Use It
Use when you are neutral-to-bullish, expect the market to hold above a support, and IV is high so the premium is rich. It has no upside tail risk, so it suits environments where a melt-up is possible but a crash is your main fear.
The Greeks
Positive Theta (income from decay), Negative Vega, Positive Delta bias.
Risks & Considerations
- Substantial risk on a sharp fall below the short put strike.
- The 'no upside risk' rule only holds if the credit truly exceeds the call-spread width.
- Assignment risk on the short put if it goes ITM (stock options).
Worked Example (Nifty)
Illustrative trade — lot size 75
Nifty 20,000. Sell 19,800 PE ₹130, sell 20,100 CE ₹150, buy 20,300 CE ₹70. Total credit = ₹210, call-spread width = 200, so credit > width → no upside risk. Max profit ₹210 × 75 = ₹15,750 between 19,800 and 20,100. Downside breakeven 19,590; below that, losses build.