What is a Jade Lizard?

Updated 12 July 2026 · by Theo Chen

A jade lizard is an income trade with one elegant trick: no upside risk. You sell an out-of-the-money put, sell an out-of-the-money call, and buy a further-out call to cap the call side — all for a net credit. Size that credit to be at least the width of the call spread and a rally simply cannot lose money. The catch lives on the downside, where the short put behaves exactly like a cash-secured put.

Want to see whether your credit clears the call width — and the breakeven, max loss and return on capital for a specific jade lizard? Plug in your strikes and premiums.

Open the Jade Lizard Calculator →

How is a jade lizard built?

Three legs, one expiration, one underlying:

Sell a put below the current price (your short put) — this is the income, and the risk.
Sell a call above the price (your short call) — more income.
Buy a further-out call above the short call (your long call) — this caps the call side and turns the naked call into a defined call spread.

The whole position is opened for a net credit (the two premiums you collect minus the one you pay). The defining move is sizing that credit so it is at least as large as the call-spread width — that is what removes the upside risk.

The payoff: why there is no upside risk

Max profit = the full net credit, kept whenever the stock finishes between the put strike and the short-call strike.
The upside = if the credit covers the call width, the worst a rally can do is leave you with credit minus width — still a profit. There is no upside breakeven.
The downside = the short put. Below the breakeven (put strike minus credit) you lose, just like a cash-secured put, down to that breakeven times 100 if the stock collapses.

A worked example

A stock trades at $100. With 45 days left you sell the 95 put for $1.50, sell the 105 call for $1.20, and buy the 107 call for $0.40 — a $2.30 net credit against a $2.00-wide call spread.

Net credit / max profit: $2.30 × 100 = $230, kept between $95 and $105.
No upside risk: credit $2.30 ≥ width $2.00, so even above $107 you still keep $30.
Downside breakeven: $95 − $2.30 = $92.70, which is also your cost basis if assigned.
Max loss: ($95 − $2.30) × 100 = $9,270 if the stock falls to zero — the cash-secured-put risk.

Jade lizard payoff at expiration

Sell the $95 put and $105 call (red), buy the $107 call (green) for a $2.30 net credit. Flat profit between $95 and $105; a small $30 floor above $107 (no upside risk); open, cash-secured-put loss below $92.70.

When a jade lizard makes sense

Reach for a jade lizard when you are neutral-to-bullish on a stock you would happily own at the put strike, and implied volatility is rich enough that a fat put credit can cover a narrow call spread. It is the natural upgrade from a naked short strangle: you spend a little credit on one long call to delete the unlimited-loss tail, and you are left with a single, manageable, cash-secured-put downside. Don't let the "no upside risk" headline fool you into ignoring that downside — size and secure the put as carefully as you would a stand-alone cash-secured put, and only on a name you actually want to own.

The bottom line

A jade lizard is a short strangle with the upside capped - you sell a put and a call spread for a credit big enough to cover the call width, which removes the upside risk entirely and leaves only cash-secured-put downside, so only trade it on a stock you would own at the put strike.

Frequently asked questions

What is a jade lizard in simple terms?

A jade lizard is a three-leg options trade for a net credit: you sell an out-of-the-money put, sell an out-of-the-money call, and buy a further-out call to cap the call side. If the credit you collect is at least the width of that call spread, the trade has no upside risk — a rally cannot lose money. The only real risk is to the downside, where the short put acts like a cash-secured put.

Does a jade lizard really have no upside risk?

Yes, as long as the net credit is at least the call-spread width. A rally caps the call spread loss at its width, and the credit you already collected covers that width — so above the long call you still keep credit minus width, a small profit. If the credit is smaller than the width, the no-upside-risk property is gone and there is a capped upside loss; a good calculator flags exactly which case you are in.

What is the risk on a jade lizard?

The downside. There is no long put, so the short put behaves like a cash-secured put: below the breakeven (put strike minus credit) you lose, all the way down to that breakeven times 100 per contract if the stock falls to zero. Only sell a jade lizard on a stock you would be content to own at the put strike, and secure the cash like any cash-secured put.

What is the difference between a jade lizard and a short strangle?

A short strangle sells a naked put and a naked call — undefined risk on both sides. A jade lizard takes that short strangle and buys one extra call to cap the upside, then sizes the credit to cover that call spread so the upside risk disappears entirely. You give up a little credit to remove the unlimited-loss tail, leaving only the cash-secured-put downside. An iron condor goes one step further and caps the downside too.

When should you use a jade lizard?

When you are neutral-to-bullish on a stock you would not mind owning at the put strike and implied volatility is rich enough that the credit covers a narrow call spread. It shines when you want premium income without the upside risk of a naked strangle. Skip it if you are outright bearish — the downside is open — or if volatility is too thin for the credit to clear the call width.

Related tools and guides

Run your own numbers in the Jade Lizard Calculator, model the uncapped version with the Short Strangle Calculator, or cap both sides with the Iron Condor Calculator. Size the downside like a cash-secured put, and see the setup conventions in strategy setups.

Educational explainer only — not financial advice. Examples are illustrative and exclude commissions, early assignment and dividends. Confirm the mechanics and size positions to your own risk tolerance.