Jade Lizard: No Upside Risk Premium-Selling Strategy

A jade lizard combines a short put with a bear call spread. Sized so the total credit collected exceeds the call spread's width. Result: zero upside risk — even if the stock rockets through the call spread, the credit covers the loss.

Construction: sell 1 OTM put, sell 1 OTM call, buy 1 further OTM call (the bear call spread's long wing). The total credit must exceed the call spread's width for the no-upside-risk property to hold. Downside risk is the short put strike minus the total credit collected — same as a naked short put with credit-reduced cost basis.

Best deployed in elevated IV environments on stocks you're willing to own at the short put strike. The structure works when IV is high enough to fund the call spread credit such that total credit exceeds the call wing width. In low IV, jade lizards are difficult to construct without giving up too much upside or downside protection.

Frequently Asked Questions

Why is the jade lizard called 'no upside risk'?

Because the credit collected equals or exceeds the call spread's max loss — even if the stock blows through the call spread, the position is at break-even or better on the upside.

What's the downside risk?

Same as a cash-secured put: the short put strike minus the total credit collected, multiplied by 100 shares per contract.

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