Jade Lizard Strategy: No Upside Risk Income 2026

What Is a Jade Lizard?

A jade lizard consists of three legs: a short OTM put, a short OTM call, and a long further-OTM call (which caps the upside risk of the short call). It's essentially a short put combined with a bear call spread.

The key to the jade lizard is this rule: the total credit received must be greater than the width of the call spread. When this condition is met, you have zero risk on the upside — even if the stock rockets to infinity, your call spread loss is fully covered by the credit you collected.

This leaves downside risk as your only concern, which is identical to the risk of a cash-secured put. You're essentially enhancing a short put's income by adding a call spread — and if you size it right, you eliminate upside risk in the process.

Example: Stock XYZ is at $100. You sell a $90 put for $2.50, sell a $110 call for $1.50, and buy a $115 call for $0.50. Total credit: $2.50 + $1.50 - $0.50 = $3.50 ($350). Call spread width: $5.00. Since your $3.50 credit is less than the $5 call spread width, you still have $1.50 of upside risk. To make it a true jade lizard with zero upside risk, you'd need to adjust strikes until the credit exceeds the call spread width. If you sold the $95 put for $4.00 instead: total credit = $4.00 + $1.50 - $0.50 = $5.00, which matches the $5 spread width — zero upside risk achieved.

When to Use It

• When implied volatility is high and you want to sell premium on both sides
• When you have a neutral to slightly bullish outlook on a stock
• When you want to enhance short put income without adding uncapped upside risk
• When you're comfortable with put-side risk (willing to own the stock if assigned)
• As an alternative to an iron condor when you want a directional tilt

How to Set It Up

1. Sell 1 OTM put (typically 20-30 delta, 5-10% below stock price) 2. Sell 1 OTM call (typically 15-20 delta, 5-10% above stock price) 3. Buy 1 further OTM call ($5-$10 above the short call) 4. VERIFY: total credit received >= width of the call spread (this eliminates upside risk) 5. If the credit is less than the call spread width, adjust your put strike closer to ATM to collect more premium 6. Target 30-45 DTE for optimal time decay 7. Close at 50% of max profit or manage early if tested

Risk & Reward

Max profit: Total credit received. In the example: $350-$500 depending on setup. | Max loss: Put strike x 100 - total credit (stock goes to $0 on the put side). Upside risk: zero if credit >= call spread width. | Breakeven: Put strike - total credit received. In the adjusted example: $95 - $5.00 = $90.

Best Brokers for This Strategy

Tastytrade popularized the jade lizard and their platform makes it simple to build one — they even flag when your credit exceeds the call spread width. Free-to-close pricing lets you take profits efficiently. IBKR has excellent margin treatment for jade lizards since the risk is one-sided. thinkorswim/Schwab provides strong probability analysis tools. See our tastytrade review.

Not financial advice. Always do your own research.