Jade Lizard
A Jade Lizard is a bullish options strategy that combines a short put with a short call spread, constructed so that the total premium collected exceeds the width of the call spread, eliminating upside risk entirely.
The Jade Lizard was popularized by options educators Tom Sosnoff and Tony Battista as a way to collect robust premium while structuring defined upside risk and undefined downside risk. The trade is assembled by selling an out-of-the-money put and simultaneously selling an out-of-the-money vertical call spread (selling a lower strike call and buying a higher strike call for protection).
The defining characteristic that separates a Jade Lizard from a simple strangle is the constraint on premium. For the trade to qualify as a true Jade Lizard, the total credit received must be greater than the width of the call spread. If the call spread is five points wide and the combined premium is six dollars, there is no upside risk — even if the stock rallies through both call strikes, the maximum loss on the call spread is capped at five points, which is less than the six-point premium already collected.
Downside risk remains uncapped. If the stock collapses, the short put can generate significant losses just as any naked short put would. This means the strategy is suited to traders with a neutral-to-bullish outlook who are willing to own the stock at the put strike if assigned.
The ideal environment is one of elevated implied volatility, which inflates the premium available and makes it easier to satisfy the no-upside-risk condition. Traders often select strikes around the 16-delta level for the put and the call spread, targeting a high probability of expiring worthless.
Management rules typically involve closing the position when it reaches 50 percent of maximum profit or when the underlying moves significantly against the short put. Because the upside is already protected, the primary concern is the put side, and adjustments such as rolling the put down and out extend the trade while reducing immediate risk.
The Jade Lizard is well-suited for stocks or ETFs that have experienced a volatility spike — earnings events, geopolitical news, or macro data releases — where premium is temporarily rich and the trader expects the situation to resolve without a catastrophic decline.