In the options trading world, strategies have various names, such as the jade lizard.

The popular options trading financial network Tastytrade often talks about this trade, so let’s dive into how the jade lizard strategy works.

What is the Jade Lizard Options Strategy

The jade lizard options strategy is a bullish options selling strategy that involves a short put and a call credit spread.

The jade lizard strategy is excellent to open if you are slightly bullish to neutral on a stock’s price.

How Does a Jade Lizard Strategy Work

The jade lizard options strategy is when you sell a put and a call credit spread.

It is best to set the jade lizard up so there is no upside risk, meaning even if your call credit spread gets tested, the trade will profit overall.

Setting up a Jade Lizard

To set up a Jade Lizard, you must first sell a short put.

Next, you add a call credit spread that allows for no risk to the upside.

To ensure your trade is risk-free to the upside, you must collect more premium than the width of the two call strikes.

Therefore, if you sell a 30 strike call and buy a 32 strike call, you must collect $2 or more in premium to negate the upside risk.

Jade Lizard Strategy Example

Let’s analyze an example of a jade lizard options trade.

Stock Ticker: $X

Sell -1 19 put @1.06

Sell -1 26 call @0.75

Buy +1 27 call @0.62

Net credit = $1.27

In this jade lizard example on $X, we will sell the 19 put and the 26 call and buy the 27 call for a net credit of $1.27.

Since we collect $1.27, and the risk of the call credit spread is $1.00, we will have no upside risk even if $X goes above $27 per share.