Reverse Jade Lizard

It's called 'Reverse' Jade Lizard because it's the opposite (mirror image) of the Jade Lizard. Where Jade Lizard has no upside risk, Reverse Jade Lizard has no downside risk. 'Twisted Sister' is an alternative name that highlights its opposite nature.

If credit < put spread width, you still have downside risk. For example, £40 credit with £50 spread = £10 downside risk if underlying drops far enough. This is technically not a 'true' reverse jade lizard but may still be a valid trade if you accept that small downside risk.

Neither is 'better' - they serve different purposes. Reverse jade lizard eliminates downside risk but has unlimited upside (like short call). Iron condor has defined risk on both sides. Choose reverse jade lizard if you're bearish-biased and want zero downside risk. Choose iron condor if you want defined risk everywhere.

If the underlying stays between your short put strike and short call strike, all options expire worthless and you keep your entire credit. This is the maximum profit scenario and a great outcome for the reverse jade lizard.

Unlike stocks which can only go to zero (100% loss on downside), stocks and indices can theoretically rise indefinitely. A short call at 7,900 could be worth £500, £1,000, or more if the underlying rallies dramatically. This is why strict stop losses are essential.

Size it based on your stop loss level. Ask: 'What would my loss be if underlying rallied to my stop level?' That loss should be 3-5% of your portfolio maximum. Don't oversize just because there's 'no downside risk' - the upside is unlimited and real.

Not necessarily. A larger buffer means better worst-case downside outcome, but it often requires trade-offs: closer call strike (more likely tested) or tighter put spread (less premium). A 10-20% buffer (e.g., £55 credit on £50 spread) is typically sufficient.

30-45 DTE is ideal. Shorter durations have faster theta but less premium to achieve credit > width. Longer durations have more premium but tie up margin longer. 30-45 days balances premium collection with manageable time exposure.

IV spike hurts (negative vega position). Assess: Is underlying still in profit zone? Is IV spike temporary or fundamental? If underlying is cooperating and IV spike is temporary, holding through is often fine. If IV spike signals potential upside move, consider closing.

The short call contributes negative delta (you want the underlying to drop). The bull put spread contributes some positive delta, but the short call dominates. Net result is slightly negative delta = slightly bearish position.

Put skew elevates OTM put IV. This means your put spread collects disproportionate premium relative to the call. You can often achieve credit > width more easily because the put spread contributes more than expected. Consider slightly narrower put spreads if skew is steep.

Convert when: (1) You want to cap upside risk that's become concerning, (2) IV has spiked making the long call cheap, (3) Position is profitable and you want to lock it in with defined risk. Buy a call above your short call to create the fourth leg.

Reverse jade lizards add negative delta (bearish bias) and eliminate downside tail risk. Use them to complement jade lizards (bullish) and iron condors (neutral). They work well when you want income but are concerned about downside gaps. Track aggregate delta and short call notional across portfolio.

If put spread is at max loss (underlying well below long put), consider closing the put spread to realize the fixed loss. You're then left with just a short call, which has maximum theta at that point. Continue managing the call side independently. This simplifies the position.

Multiple reverse jade lizards on correlated underlyings (e.g., UK stocks during market rally) means correlated short call risk. A market rally hits all call sides simultaneously. Diversify across uncorrelated underlyings and set portfolio-level limits on short call notional exposure.