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Jade Lizard

Most premium sellers live in fear of the blow-up. You sell a strangle, collect your credit, then BTC rips 20% and your naked short call takes you to the cleaners. The jade lizard solves exactly one half of this problem: it eliminates upside risk entirely.

You sell an OTM put, sell an OTM call, and buy a further OTM call to cap the upside. The total credit must exceed the width of the call spread. When it does, you've built a trade where BTC can go to infinity and you don't lose a cent. You can only lose on the downside.

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The jade lizard is a short strangle where you buy a call wing to cap one side. The remaining credit must exceed the wing width. When it does, you've created a trade with risk on only one side. No upside blow-up. Ever.

What You Do​

The SetupYou receive premium
Sell1 OTM put
Sell1 OTM call (short leg of call spread)
Buy1 further OTM call (long leg of call spread)
Max Profit
Total credit
Upside Risk
None (if credit > call width)
Downside Risk
Put strike - credit
Best Outcome
Stay between put and call

Worked Example​

BTC at 94,800. Sell the 88k 21-day put for 1,250. Sell the 101k call for 980. Buy the 105k call for 420.

Call spread width: 4,000. Total credit: 1,250 + 980 - 420 = 1,810. Credit exceeds the 4,000 call spread width? That's the critical check. You need credit > call spread width. Let's widen the call spread or use a higher IV environment.

Revised: IV spikes after a 10% BTC drawdown. Sell the 88k 21-day put for 2,350. Sell the 101k call for 1,680. Buy the 103k call for 1,180.

Call spread width: 2,000. Total credit: 2,350 + 1,680 - 1,180 = 2,850. Credit (2,850) exceeds call spread width (2,000). The jade lizard is valid.

  • BTC at 94,800 at expiry: everything expires worthless. You keep 2,850.
  • BTC at 110,000: call spread maxes out at -2,000. You still keep 2,850 - 2,000 = 850. No upside loss.
  • BTC at 85,000: put is 3,000 ITM against you. Loss: 3,000 - 2,850 credit = 150. This is where the pain lives.
  • BTC at 80,000: put is 8,000 ITM. Loss: 8,000 - 2,850 = 5,150. Downside is real and unbounded down to zero.

How the P&L Works​

  1. Below the put strike. The short put goes ITM. Losses grow, offset partially by the credit collected. This is your only risk zone.
  2. Between put and short call. All options expire worthless. You keep the full credit. This is the sweet spot.
  3. Between the call strikes. The short call is ITM, eating into credit. But because total credit exceeds the call spread width, you can't lose.
  4. Above the long call. The call spread is at max loss (the width), but you collected more than the width. Still net positive or breakeven.
Spot at Expiry$100k
$70k$130k
Total Credit$6k
$5k$10k
BE $89k$0+$6k-$19k$70kK1 $95kK2 $105kK3 $110k$130kSpot Price at ExpiryP&L
Settlement
$100k
P&L
+6.0k
Max Loss
Substantial
Max Gain
+$6k

When to Use​

  • IV is elevated. You need rich premiums to get enough credit to exceed the call spread width. Post-crash environments are ideal.
  • You want to sell premium with a bullish lean but can't stomach the unlimited upside risk of a naked call or strangle.
  • You're OK with naked downside exposure on the put. If BTC craters, you're taking that ride.
  • Skew is steep. OTM puts are expensive (high IV) which inflates the credit from the put sale.

Common Mistakes​

Common Mistakes
The mistakeNot checking that credit exceeds the call spread width. You put on a 'jade lizard' with \$1,800 credit and a \$2,000 call spread.
The realityThat's not a jade lizard. That's a short strangle with a long call wing that doesn't protect you. If the credit doesn't exceed the call spread width, you have upside risk. The whole point of the structure is gone.
The mistakeTreating the downside as 'defined' because the trade has a name. "It's a jade lizard, it's fine."
The realityThe downside is a naked short put. If BTC drops 30%, your put is deep ITM with no hedge. The jade lizard eliminates upside risk only. Downside risk is real, large, and yours.

Greeks at a Glance​

Greek
Sign
Plain English
Delta
+
Net positive (short put dominates). Bullish lean.
Gamma
-
Negative near short strikes. Big moves hurt.
Theta
+
Time decay earns you money. This is a premium collection trade.
Vega
-
Rising IV hurts. You want vol to collapse after entry.

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