Jade Lizard

A put sold below a sold call spread: when the credit taken in is larger than the width of the call spread, the structure carries no loss above the strikes.

Also called Short put with call spread

Outlook

Neutral

Family

Combination

Level

Expert

Legs

3 legs

Expirations

1 expiration

Opens for

Credit

Maximum profit

Limited

Maximum loss

Limited

Legs at the reference strikes this page's diagrams are drawn from

Leg	Side	Contract	Ratio	How the strike is chosen
A	Short	Put 97.5	1	Delta 30
B	Short	Call 105	1	Delta 30
C	Long	Call 110	1	5.00 points further out of the money than B

What it is

Three legs in one expiration: a put sold at A below the price, a call sold at B above it, and a call bought at C further out. In other words a short put and a bear call spread, held together.

It has one defining property, and it is arithmetic rather than opinion:

If the total credit exceeds the width of the call spread (C − B), the structure cannot lose money above B.

The call spread’s maximum loss is its width; if the credit already covers that, the worst the upside can do is give the credit back. That is the condition the strategy is built around, and it is checkable before the position is opened.

The payoff

At expiration

A flat top over the middle with a step down above the call spread, and a falling line below the short put strike.

• Below A — the short put is in the money and the position loses with the underlying, down toward zero. This is the undefined side.
• Between A and B — everything expires worthless and the full credit is kept.
• Between B and C — the short call is in the money and the position gives back part of the credit.
• Above C — the long call caps it. The result is fixed at credit − (C − B), which is zero or better when the defining condition holds.

How it behaves before expiration

Today, before expiration

Today's value is a shallow curve below the flat top, with the corners rounded.

The flat top is a mound before expiry, and the credit is realised over the life of the structure rather than at once.

The Greeks

Delta is positive — the short put dominates the call spread.

Gamma is negative around A and B.

Theta is positive: three legs, two of them sold.

Vega is negative.

Where it lives in the volatility environment

Practitioners describe the jade lizard as a way to sell premium on both sides while removing upside risk entirely, and generally note that whether the defining condition can be met depends on the shape of implied volatility across strikes: the credit has to cover the call spread’s width, and it is the relative pricing of the put against the calls that decides whether it does.

What can go wrong

• The downside is undefined. The fact box says Limited only because a share price stops at zero. There is no long put under the short one.
• The no-upside-risk property is conditional. If the credit does not exceed C − B, the structure loses above C like any other. It is worth checking rather than assuming.
• Early assignment on the short put leaves 100 long shares.
• Three legs, six crossings, and the property depends on the credit actually achieved, not the mid price quoted.
• Closing partially breaks the arithmetic. Buying back the long call turns the upside into a naked short call.

Building it in Option Panel

Open Build Strategy and pick Jade Lizard. The short put and short call are selected by delta or strike, and the long call is an offset from the short one — which is what fixes the width the credit has to beat. The builder shows the net credit before the structure is committed, so the defining condition can be checked against the actual numbers.

Back to the encyclopaedia · What-if analysis in the docs

Related strategies

• Short Put — the undefined leg of this structure, on its own.
• Bear Call Spread — the defined half.
• Reverse Jade Lizard — the mirror, with the uncovered leg on the upside.