Reverse Jade Lizard

A call sold above a sold put spread: the mirror of the jade lizard, with the uncovered leg on the upside and the defined spread below.

Also called Short call with put spread, Twisted sister

Outlook

Neutral

Family

Combination

Level

Expert

Legs

3 legs

Expirations

1 expiration

Opens for

Credit

Maximum profit

Limited

Maximum loss

Unlimited

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

Leg	Side	Contract	Ratio	How the strike is chosen
B	Short	Put 97.5	1	Delta 30
A	Long	Put 92.5	1	5.00 points further out of the money than B
C	Short	Call 105	1	Delta 30

What it is

A put sold at B, a put bought at A below it, and a call sold at C above the price — a bull put spread with a short call written over the top.

It is the jade lizard reflected, and the reflection matters more than it does for most mirrored pairs in this encyclopaedia. Here the uncovered leg is the call, and a call has no ceiling. The fact box reads Unlimited for maximum loss where the jade lizard reads Limited, and that difference is not a rounding.

The payoff

At expiration

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

• Below A — both puts are in the money and the spread is worth its width. The loss stops there: credit − (B − A).
• Between A and B — the short put is in the money and the position gives back part of the credit.
• Between B and C — everything expires worthless and the full credit is kept.
• Above C — the short call is in the money and the loss grows with no bound.

The mirrored condition holds on the downside: if the credit exceeds B − A, the structure cannot lose below A.

How it behaves before expiration

Today, before expiration

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

As with the jade lizard, a mound rather than a plateau until close to expiry.

The Greeks

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

Gamma is negative around B and C.

Theta is positive.

Vega is negative, and most so at C, where the uncovered leg sits.

Where it lives in the volatility environment

The mirror of the jade lizard’s reasoning, with one asymmetry worth stating: on equity underlyings out-of-the-money puts are often priced above equidistant calls, so the credit here is usually harder to raise above the put spread’s width than the jade lizard’s is above its call spread’s.

What can go wrong

• The loss above C is unbounded. This is the material difference from the jade lizard, and the reason to read the two pages as different structures rather than as a pair.
• Early assignment on the short call leaves 100 short shares, with borrow and recall attached — see short stock.
• The downside condition is conditional, exactly as its mirror is, and has to be checked against the credit achieved.
• Three legs, six crossings.
• Buying back the long put leaves a short strangle, with unbounded risk on both sides.

Building it in Option Panel

Open Build Strategy and pick Reverse Jade Lizard. The short put and short call are selected by delta or strike, and the long put is an offset from the short put. The net credit is shown before committing, so the downside condition can be checked.

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

Related strategies

• Jade Lizard — the mirror, with the uncovered leg on the downside where a share price has a floor.
• Short Call — the uncovered leg on its own, and the same warning.
• Bull Put Spread — the defined half.