Jade Lizard

The name 'jade lizard' was coined by the tastytrade team. It's a colorful name for this specific three-legged options structure. The name has no deeper meaning - it's just memorable branding for this particular combination.

On the upside, yes - jade lizards can have zero upside risk if structured correctly, while strangles have unlimited upside risk. On the downside, both have substantial risk. Overall, jade lizards have one-sided risk versus two-sided risk for strangles.

You have two choices: 1) Accept the residual upside risk (you'll lose if stock rallies past long call), or 2) Narrow the call spread width or choose different strikes until credit ≥ width. Most traders insist on eliminating upside risk.

You can, but some stocks are better suited. Choose stocks with: high liquidity, elevated IV, clear support levels, no imminent earnings, and low gap risk. Avoid highly volatile meme stocks or pre-earnings positions.

If you structured it correctly (credit ≥ call spread width), a big upside move results in zero loss or even a small profit. The call spread loses money, but the credit covers it. This is the 'magic' of the jade lizard.

Margin is driven by the naked put. Typical calculation: 20% of underlying price + put premium - OTM amount, with a minimum. The call spread is defined risk and doesn't add margin. Check with your broker for specific requirements.

It depends on whether you can roll for a credit and if your thesis is still valid. If you can roll down and out for a credit and believe the stock will stabilize, roll. If support has broken and you don't want the stock, close and take the loss.

Yes, experienced traders sometimes leg in - perhaps selling the put first, then adding the call spread later if the stock rises. However, this adds execution risk and requires more attention. Most traders enter all legs together.

A jade lizard has a short put + short call spread. A big lizard has a short straddle (put AND call at same strike) + long OTM call. The big lizard is more neutral and has more risk on the downside due to the ATM short put.

Unusual but possible if stock drops below put then rallies above long call. Put assignment gives you stock. Call assignment (if ITM) takes it away. You'd have assignment and exercise events to manage. This is rare - typically only one side is challenged.

Put skew means OTM puts have elevated IV compared to ATM. Choose put strikes where skew provides maximum premium. Sometimes moving the put slightly closer to ATM captures disproportionately more premium due to skew curvature.

Enter at IV Rank > 40% with credit > call spread width. Target 45 DTE entry. Exit at 50% profit or 21 DTE. Use 2-3% risk per position. Limit total portfolio to 5-7 concurrent jade lizards. Track aggregate naked put exposure vs portfolio.

High-beta stocks will see put sides hurt more in market selloffs. High correlation means all jade lizards suffer simultaneously in crashes. Diversify across betas and correlations. Consider VIX calls as portfolio-level hedge against correlated selloffs.

Some traders accept small upside risk if: 1) The credit is still excellent, 2) They're very confident stock won't rally that much, 3) The upside risk is minimal (e.g., credit is 90% of width). This is a judgment call based on conviction.

Model scenarios: 20% market drop in a week, VIX to 50, flash crash, multiple positions assigned simultaneously. Calculate margin calls, portfolio drawdown, and recovery paths. Ensure your size allows survival of worst-case scenarios.