Jade lizard

Definition

A jade lizard combines a short put with a short call vertical (bear call spread), constructed so the total credit exceeds the call spread’s width — eliminating upside risk entirely: if the underlying rallies through the call strikes, the width owed is less than the credit collected. Risk is confined to the downside, where the short put behaves like a cash-secured put.

How it works / structure

• Legs: −1 put K1 (below spot), −1 call K2 / +1 call K3 (above spot), same expiry; entry constraint: total credit C > K3 − K2 (the no-upside-risk condition — the structure’s defining rule, checked at entry, enforced by the engine).
• Payoff at expiry: above K3, keep C − (K3 − K2) > 0; between K1 and K2, keep the full credit; below K1 − C, losses grow like a short put (undefined to zero).
• Parameters (engine-executable): put delta (e.g. 0.20-0.30), call-spread strikes/width, the credit > width entry gate, DTE, IV gate (iv_rank — the structure needs rich premium to satisfy its constraint), management (mgmt-profit-target, put-side roll (mgmt-rolling), assignment handling).
• Skew fit: sells the rich put wing and the call body while buying the cheap upside tail — the equity smirk is what makes the credit > width condition satisfiable (opt-volatility-skew).

When it applies

Neutral-to-slightly-appreciating theses on names the account would own at K1 − C (the put side carries cash-secured-put logic), in elevated IV where the entry constraint is achievable. Common post-IV-spike structure: upside risk removed for the recovery, paid for by downside acceptance.

Risk profile & failure modes

• The downside is a naked put: everything below K1 − C is undefined risk to zero; the “no risk on one side” framing invites oversizing the side that has all of it.
• Constraint drift: partial closes or rolls can break the credit > width condition mid-position, silently reintroducing upside risk — the engine re-checks the invariant on every adjustment.
• Rich-premium dependence: in calm IV the constraint forces strikes so close that the structure is just a strangle with extra legs and friction.
• Three-leg costs: entry, management, and exit each pay three spreads (ms-bid-ask-spread).

Evidence & limits

Mechanics are contract arithmetic (OCC/Cboe); the name is practitioner vocabulary (documented here as the platform’s binding definition). No published study evaluates jade lizards; component evidence is the short-put and short-vertical literature basis (volatility risk premium, opt-implied-volatility), with the put side’s crash concentration. Replay per underlying is the platform’s evidence.

Falsifiable-thesis examples

Illustrations only, not signals:

• “X will finish the cycle above K1 (full credit kept)” — falsified by a finish at or below K1.
• “A 45-DTE jade lizard program on Y (0.25-delta puts, credit > width enforced), managed at 50% of credit, will end the quarter positive in replay” — falsified by the replay P&L.

Cross-references

• Components: strategy-cash-secured-put (the risk side), strategy-bear-call-spread (the financed side)
• Sibling: strategy-strangle (both sides undefined instead)
• Pricing source: opt-volatility-skew, opt-iv-rank-percentile
• Management: mgmt-profit-target, mgmt-rolling, mgmt-assignment-handling