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Jade lizard vs short strangle: does the lizard really remove the risk?

A jade lizard is a short strangle plus one extra call bought above. Pick it if a rally is the risk you can't stomach. It removes that risk only when the total credit is bigger than the width of the call spread, and it does nothing for a drop.

Comparison · 7-minute read · Updated 2026-11-09

The short answer

A short Strangle sells a put below the stock and a call above it. You collect two premiums. If the stock runs up or crashes, the loss has no fixed limit on the call side.

A jade lizard sells the same put and the same call, then buys a second call further up. That bought call caps the upside loss. It costs money, so the lizard always collects less than the strangle.

Pick the strangle if you want the biggest credit and can manage a rally. Pick the lizard if a rally is the risk you can't live with. But check one rule first:

Neither trade protects you on the way down. Below the put, both lose almost the same.

Side by side

Same strikes, both trades (hypothetical)

Copperline Rail, a made-up stock, trades at $100. Both trades run 45 days.

The short strangle. Sell the $95 put for $2.50. Sell the $105 call for $2.70. Credit: $5.20, so $520. Break-evens: $89.80 and $110.20.

The jade lizard. Same $95 put and $105 call. Also buy the $107.50 call for $1.90. Credit: $5.20 − $1.90 = $3.30, so $330. The call spread is $2.50 wide ($105 to $107.50). The credit, $3.30, is bigger than $2.50, so the rule holds.

Above $107.50, the lizard owes $2.50 on the call spread and keeps $3.30 of credit. That leaves +$0.80, so +$80, no matter how high the stock goes. Its only break-even is $91.70 ($95 − $3.30).

The top rows are the lizard's whole point. At $125 the strangle is down $1,480 and still falling. The lizard sits at +$80.

The drop: both lose, the lizard a little more

Now the bottom row. Copperline falls to $80. You are assigned 100 shares at $95, worth $80. That is $1,500 below the strike.

• Strangle: −$1,500 + $520 credit = −$980.
• Lizard: −$1,500 + $330 credit = −$1,170.

The lizard loses $190 more, which is exactly what its extra call cost. That call protects the top, so on a drop you paid for insurance you didn't use. Between $89.80 and $91.70, the strangle is still in profit while the lizard is already losing.

When the rule breaks

Say you bought the $110 call instead, for $1.30. The credit is $5.20 − $1.30 = $3.90. But now the call spread is $5 wide. Above $110, you owe $5.00 and only have $3.90. That's −$110 at any price above $110.

That is still far better than the strangle's open-ended loss. But it is not "no upside risk." Many write-ups say a jade lizard has no upside risk, full stop. That is only true when the credit beats the width.

Which one should you pick?

A quick test before you place a lizard: add up the credit, subtract the call-spread width. If the answer is above zero, the upside is covered. Then size the trade as if you'll own 100 shares at the put strike, because that is the risk both trades share. That share-buying risk is the same one a cash-secured put carries.

Both trades sell a put without a long put under it. Most brokers want a high options permission level and a margin account. Canadian registered accounts (TFSA, RRSP) usually won't allow them, so check your broker.

For the lizard on its own, see the jade lizard guide. For the strangle on its own, see the short strangle guide. The options strategy comparison chart puts both next to every other strategy, and the wheel strategy sells only one side at a time.

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