Jade Lizard Strategy 

The Jade lizard is a custom strategy built using a bear vertical call spread and an OTM put which is sold on top of the vertical call spread to reduce the risks. It is considered as a neutral or slightly bullish strategy.

In simple terms, this option strategy is constructed by buying a call option at one strike price K3, selling another call option at a lower strike price K2, then selling an OTM put option at a strike price K1 lower than that of both call options. All the options sold and bought should have the same expiry date.

Let’s take a simple example:

XYZ stock is currently trading at $90. A trader wants to implement a Jade Lizard on XYZ stock, expiring in six months. Then, he will need to:

  • Buy a Mar22 80 call (K3, OTM)
  • Sell a Mar22 70 call (K2, OTM)
  • Sell a Mar22 60 put (K1, OTM)

The Jade Lizard strategy takes advantage of the volatility skew inherently priced into options with naked puts trading richer in premium than naked calls (more implied volatility priced with put) and short call spreads trading richer in premium than short put spreads. This volatility skew effect allows traders to collect more premium for the whole position and then, increasing the position’s probability of profit while limiting its cost. The term « Jade Lizard » was first used by former CBOE floor traders, Liz Dierking and Jenny Andrews.


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