Jade Lizard
Sell an OTM put and a bear call spread — collect premium with no upside risk. A popular income strategy with a bullish lean.
A jade lizard combines a short out-of-the-money put with a bear call spread on the same expiration. You collect a net credit from all three legs, and if that credit exceeds the width of the call spread, you eliminate upside risk entirely. The result is a premium-selling structure with a mild bullish lean, one-sided downside exposure, and zero risk to the upside — a profile you can’t get from a simple iron condor or strangle.
The structure
A jade lizard has three legs, all on the same expiration:
- Short OTM put— the income engine. This is a naked put that profits if the stock stays above the strike.
- Short OTM call— additional premium on the upside. Sold above the current stock price.
- Long further-OTM call— the cap on upside risk. Bought above the short call to form a bear call spread.
Together the short call and long call form a bear call spread. Add the naked put and you have a jade lizard. The key insight: if the total credit received is greater than or equal to the width of the call spread, there is no upside risk at all. The worst thing that can happen on the upside is that you keep the difference between the credit and the call spread width — which is zero or positive.
Worked example
Stock: XYZ at $100. IV rank is 55. You’re mildly bullish and want to sell premium. The 35 DTE jade lizard:
- Sell $95 put at $2.00
- Sell $105 call at $2.30
- Buy $110 call at $0.80
- Net credit: $2.00 + $2.30 − $0.80 = $3.50 ($350 per contract)
- Call spread width: $110 − $105 = $5.00
- Credit ($3.50) < call spread width ($5.00), so upside risk = $5.00 − $3.50 = $1.50 ($150) per contract
Now suppose the call spread was $105/$108 instead, making the width $3.00. With the same $3.50 total credit, the credit exceeds the width — no upside risk. If the stock rallies to $200, the call spread loses $3.00 but you collected $3.50, netting $0.50 profit. That’s the magic of the jade lizard.
On the downside, the naked put behaves like any cash-secured put. Max loss occurs if the stock falls to zero: $95 (put strike) − $3.50 (credit) = $91.50 per share ($9,150 per contract). In practice, you manage the trade long before that.
When to use it
- Mildly bullish outlook.You think the stock is more likely to drift up or sideways than to sell off. The short put gives you a bullish lean; the bear call spread caps your upside exposure if you’re wrong about direction.
- IV rank ≥ 30, ideally ≥ 50. Like any premium-selling strategy, the jade lizard needs elevated implied volatility to produce a credit fat enough to offset the downside risk and ideally exceed the call spread width.
- You want income without upside blow-up risk. If you’re uncomfortable with the unlimited call-side risk of a short strangle but want more premium than an iron condor, the jade lizard is a natural middle ground.
- 30-45 DTE. Same theta-decay window as other income trades. Enough time to collect premium without too much gamma exposure near expiration.
How Tradient ranks them
The jade lizard scanner in backend/app/strategies/income.pyiterates OTM put strikes at your target delta, then pairs each with OTM call spreads at various widths. For each combination it checks whether the total credit exceeds the call spread width (the “no upside risk” condition). Candidates that satisfy the condition are flagged and sorted higher.
The Tradient Score favors jade lizards with:
- Total credit ≥ call spread width (no upside risk)
- POP ≥ 65% (delta-implied probability of profit)
- IV rank ≥ 50 (the income-strategy IV bonus)
- Tight bid-ask on all three legs
- Put strike at or below a visible support level
Managing the trade
Close at 50% of max credit
The standard income-trade management rule applies. On a $3.50 credit, set a limit order to buy the entire position back at $1.75. You capture half the premium in a fraction of the time and eliminate the risk of a late reversal eating your gains.
Roll the put down if the stock weakens
If the stock drifts toward the short put strike, you can roll the put down and out to a lower strike and later expiration, ideally for a small credit. This buys time and widens the distance between the stock and your danger zone. Don’t roll for a debit — that’s throwing good money after bad.
Close if the stock approaches the short call
Even though upside risk may be zero or small, a stock sitting right on the short call strike creates gamma risk near expiration. If the stock rallies into the call spread zone with more than a week to go, consider closing the entire position and redeploying into a new cycle.
Common mistakes
- Ignoring the downside because the upside is “free.” The no-upside-risk feature is appealing, but the naked put is still there. A 20% gap down will hurt just as much as it would on a standalone short put.
- Call spread too wide.If the call spread width exceeds the total credit by a large margin, you’ve created meaningful upside risk and defeated the purpose of the structure. Keep the width tight enough that the credit covers it.
- Low-IV entries. In a 15% IV rank environment the credit is too thin to exceed the call spread width, and the put premium barely compensates for the downside exposure. Wait for IV to expand.
- Holding through earnings.A binary catalyst can blow through the put strike overnight. The jade lizard is a non-event income trade — close before any scheduled catalyst.
Where to go next
- Iron Condor — the defined-risk, four-legged income alternative.
- Short Strangle — undefined risk on both sides, but simpler and higher credit.
- Bear Call Spread — the call-side component of the jade lizard, on its own.