Jade Lizard

The name 'jade lizard' comes from the options trading community and doesn't have a clear origin story. Like many colorful options strategy names (iron condor, butterfly, etc.), it's simply the accepted term. The name may relate to the asymmetric profile looking like a lizard on a profit/loss chart, but this is speculation.

This is the ideal outcome! All options expire worthless, and you keep the full credit. The stock ended in your profit zone - above the put strike and below the short call strike. Maximum profit achieved.

You have several options: (1) Use a narrower call spread (A$2 instead of A$3), (2) Choose a lower put strike (more premium), (3) Wait for IV to increase, (4) Choose a different stock with higher IV. Don't enter if you can't achieve the proper credit structure.

Not really. Jade lizards have unlimited downside risk and require Level 3-4 options approval. Beginners should master defined-risk strategies like vertical spreads and iron condors first. The naked put component requires experience with risk management and adjustment.

You need capital as if you're buying 100 shares at the put strike. For a A$44 put on BHP, reserve A$4,400 per contract. Margin requirements will be less, but you should have the full amount available in case of assignment. This isn't a strategy for small accounts.

Ideally yes, but sometimes accepting small upside risk (A$0.20-0.50) is acceptable if it significantly improves put-side risk or you're more bullish. The key is knowing your exact risk. Never enter without calculating whether credit exceeds spread width.

Jade lizard is better when you want to eliminate upside risk while accepting downside risk on a stock you'd own. Short strangle is better when you want more premium and are comfortable with unlimited risk both directions. Jade lizard = bullish lean with income. Strangle = truly neutral.

Generally, narrower call spreads (A$2-3) are better because they're easier to cover with credit and have defined, smaller upside risk if credit falls short. Wide call spreads require substantial put premium to cover, limiting put strike selection.

Yes, rolling is a key management technique. Roll the put down for credit when tested. Roll out (to later expiration) for credit if you need more time. The call spread can also be rolled up if the stock rallies slowly. Never roll for a debit unless converting to iron lizard.

Dividends affect the call side. If the short call is ITM near ex-dividend and time value is less than the dividend, early assignment is likely. Monitor call-side assignment risk near ex-dates. The put side is less affected by dividends directly.

Use the skew curve to identify where put premium is richest (typically -0.15 to -0.25 delta). Check term structure for elevated IV at your expiration. Calculate implied volatility advantage: (IV at your strike - ATM IV) shows the skew premium you're capturing. Target strikes with highest skew advantage while maintaining proper credit structure.

Backtests suggest filtering on: A-VIX < 22 (avoid fear spikes), A-VIX trending down (regime confirming), credit spread indices stable (no credit stress). Additionally, avoid entering when put skew is in top decile (extreme fear). These filters reduced 2020 drawdown from 28% to under 10% while maintaining most of the returns.

Model under correlation = 1 scenario (all positions move together). Calculate aggregate put exposure at -2 and -3 standard deviation moves. Ensure aggregate max loss in a 2008-style crash is survivable. Consider that IV spikes during crashes hurt (you're short vega). Size based on worst-case, not average case.

Dynamic addition outperforms when more than ~65% of trades never trigger the wing addition threshold (delta -0.30). This captures full jade lizard premium on most trades while protecting the ~35% that are tested. Backtest shows dynamic approach adds ~15-20% to annual returns vs always using iron lizard.

Jade lizards add net positive delta and short vega to portfolios. Balance with strategies that are delta-negative (bear spreads, puts) or vega-positive (calendars, long straddles). Monitor aggregate Greeks. In a portfolio of iron condors, jade lizards can tilt the overall position slightly bullish while adding premium.