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Glossary of Terms and Strategies for Options Trading
Complete Options Glossary: Strategies, Terms, Greeks, and Option Selling Techniques. Clear, concise, and suitable for both beginners and advanced traders. Learn to trade options effectively.
Strategy
Advanced, Income
Jade Lizard
Combination of a short put and a call spread for income with limited upside risk.
Detail
The Jade Lizard is a neutral to bullish options strategy that combines a short put and a short call spread (bear call spread).
It’s designed to collect premium with no upside risk, because the total credit received is greater than the width of the call spread.
If the underlying stays within the short put and call spread range, the trader keeps the full premium.
The Jade Lizard combines two components:
– A short put, which generates income and takes on downside risk
– A short call spread, which caps upside gains but also limits risk on the top side
The key is to structure the trade so that the total credit received is greater than the width of the call spread.
This ensures that even if the underlying rallies above the call spread, the position cannot lose money.
The trade benefits most when the underlying stays between the short put strike and the short call strike.
It is popular among income traders who want a defined risk to the downside and no risk on the upside.
Optimal conditions
Best used in neutral to slightly bullish market conditions.
Works well when implied volatility is high and calls are richly priced.
Ideal when the trader expects consolidation or a modest rise.
Max profit
Total credit received from selling the put and call spread.
Profit is kept if the underlying stays below the short call strike and above the short put.
Max loss
Occurs if the underlying drops far below the short put strike.
Loss increases with further downside, offset only by the total premium received.
Risks
Downside risk is similar to a naked put – if the price drops below the short put, losses increase.
Upside risk is limited by the call spread and offset by the excess credit.
Must monitor early assignment risk on the short put near expiration.
Greeks
Delta: Slightly positive – mildly bullish position
Theta: Positive – benefits from time decay
Vega: Negative – prefers falling volatility
Gamma: Limited – due to spread structure
Variations
Reverse Jade Lizard (combination of call + put spread statement, for the opposite view).
Usage example
You sell a put at strike 90 and simultaneously sell a call at 100 and buy a call at 105.
Total credit received = $3.
If the underlying expires between 90 and 100, you keep the entire premium.
Even if the stock goes above 105, your loss on the call spread is capped at $5 – $3 = $2.
DTE
30–60 days, depending on the expected calm in the market.
IV (implied volatility)
A high IV is advantageous for higher premiums.
Premium
Credit (we accept premium).
Margin
Margin requirement is driven by the short put and short call spread.
Defined upside risk reduces overall margin compared to a naked put.
Notes
Great for option sellers who want a “no upside risk” setup.
Always check that credit received > call spread width to lock in protection.
Can be adjusted into an Iron Condor or closed early for profit.
Tags
jade lizard, short put, call spread, income, neutral, advanced strategy
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