What is a big lizard options strategy?

A big lizard sells a put and a call at or near the current stock price and buys a further out-of-the-money call, collecting a net credit that equals or exceeds the width of the call spread. It is a short straddle with the upside risk removed. It profits from a volatility collapse and a stock that stays close to the short strike, and its risk is on the downside.

What is the difference between a jade lizard and a big lizard?

A jade lizard sells an out-of-the-money put and call spread, creating a range of maximum profit between the short strikes. A big lizard sells the put and call at or near the money with a wider call spread, collecting a larger credit but concentrating the maximum profit at one price. Both remove upside risk when the credit exceeds the call spread width, and both carry naked put risk.

How do you calculate max loss on a big lizard?

Maximum loss is the short put strike minus the net credit, multiplied by 100, and it occurs if the stock falls to zero. With a $100 short put and a $10.10 credit, that is $8,990. On the upside there is no loss, provided the credit is at least the width of the call spread.

Is a big lizard good for earnings?

It is one of the more common earnings structures because at-the-money implied volatility is highest right before the report and collapses right after. The large credit gives a wide cushion on the downside, and the long call removes the risk of a gap higher. The trade still loses if the stock gaps down by more than the credit.

Where is the breakeven on a big lizard?

There is only one, on the downside, equal to the short put strike minus the net credit. In the example that is $100 minus $10.10, or $89.90. There is no upside breakeven because the credit covers the call spread width, so any rally finishes with a small profit.

Can a big lizard lose money on the upside?

Only if the credit collected is less than the width of the call spread. In that case the maximum upside loss is the width minus the credit, times 100, reached at or above the long call. Traders typically adjust the long call strike or wait for better pricing so that the credit covers the width before entering.

Big Lizard Calculator & strategy guide

Income & CreditAdvancedNeutralUndefined risk

A Jade Lizard with both short strikes at the money: a short straddle plus a long OTM call, for a much larger credit.

Payoff at expiration

Worked example: XYZ at $100, 45 days to expiration

Profit Loss Breakeven

Max profit: +$1,010; Net credit received
Max loss: −$8,990; Short put strike − net credit if stock falls to $0
Breakeven: $89.90; Short put strike − net credit

The trade · net credit $10.10 a share ($1,010)

Sell $100 put · $6.30
Sell $100 call · $6.50
Buy $110 call · $2.70

Price this big lizard on SPY with today's chain — then change the ticker, strikes and expiry.

Open in Build

What is a big lizard?

A big lizard is a jade lizard with the short strikes pulled in toward the current stock price and the long call moved further out. In its most common form the short put and short call share the same strike, so the position is a short straddle with a long out-of-the-money call attached. The at-the-money short options collect a far larger credit than a standard jade lizard, and the goal is the same: a credit at least equal to the call spread width, so the trade has no upside risk.

Because the short options sit at the money, the plateau of maximum profit is a single point rather than a range, and the trade begins giving back credit as soon as the stock moves in either direction. That makes it less a range trade and more a way to collect a large volatility premium when implied volatility is unusually high, such as before earnings, and profit from the collapse that follows.

The payoff diagram is a short straddle with its right side flattened. It peaks at the short strike, slopes down on both sides, then goes flat on the upside at the long call, finishing at a small positive value equal to the credit minus the call spread width. On the downside there is no wing, so the slope continues to a stock price of zero. The big lizard collects more, tolerates a larger drop before its breakeven, and pays for that with a narrower peak.

Setup

Leg	Strike	Expiry
Sell 1 put	At the money	Near
Sell 1 call	At the money	Near
Buy 1 call	2 strikes OTM	Near

Big Lizard example

XYZ trades at $100 with 45 days to expiration and implied volatility near its 52-week high. You sell the $100 put for $6.30, sell the $100 call for $6.50, and buy the $110 call for $2.70. Total collected is $12.80 and total paid is $2.70, so the trade opens for a net credit of $10.10 per share, or $1,010. The call spread is $10 wide, and the credit exceeds that width by $0.10.

Stock at expiration	Result
$100 (unchanged)	All three options expire worthless. You keep the full $1,010 credit, the maximum profit.
$115 (large rally)	The $100 put expires worthless. The short $100 call costs $15.00 ($1,500) and the long $110 call is worth $5.00 ($500), so the call spread loses $1,000. P&L is $1,010 minus $1,000, or $10, and it stays at $10 for any price above $110.
$89.90	Breakeven. The calls expire worthless and the $100 put is $10.10 in the money, costing $1,010, which exactly cancels the credit.
$80	The calls expire worthless. The $100 put is $20.00 in the money, costing $2,000. Loss is $2,000 minus the $1,010 credit, or −$990. Each further dollar of decline adds $100.

Maximum profit is $1,010 only if XYZ closes exactly at $100. Any rally above $110 leaves a $10 profit because the credit covers the $10 call spread. The single breakeven is $89.90, and the maximum loss is $8,990 if XYZ goes to zero, the same downside as a $100 short put with a $10.10 credit.

When to use a big lizard

Implied volatility is extremely elevated, typically ahead of earnings or another scheduled event, so the straddle credit less the wing cost still exceeds the call spread width.
You expect the stock to move less than the options market implies and want to be paid for that view without unlimited risk on the upside.
You are willing to own the stock at the short put strike if assigned, since the downside is a naked put.
You prefer a larger credit and a lower downside breakeven over the wider profit range of a standard jade lizard.
Typical entries are placed shortly before the event using the nearest expiration that captures it, or with 30 to 45 days when used as a volatility trade without a specific catalyst.

Risks to understand

The maximum profit occurs at a single price. Any move away from the short strike immediately reduces the gain, and a move of more than the credit to the downside produces a loss.
Downside risk is that of a short at-the-money put, which is far more likely to finish in the money than the out-of-the-money put in a standard jade lizard. In the example a drop to $80 loses $990.
If implied volatility rises further after entry instead of collapsing, the short straddle loses value quickly even if the stock has not moved.
The short call is at the money and can be assigned early once the stock rises, particularly before an ex-dividend date, which creates a short stock position hedged only by the long call.
The margin requirement is driven by the naked short put at the money and can be substantial relative to the credit received.

Managing the trade

Close soon after the event or once implied volatility has collapsed, since this is primarily a short volatility trade and most of the gain arrives quickly.
Take profits at 25 to 50 percent of the credit rather than waiting for expiration. Holding a short straddle for the last few dollars exposes you to large gamma near the strike.
If the stock rallies through the long call, the outcome is locked at a small profit and the trade can be left to expire or closed to free margin.
If the stock drops, roll the short put down and out for a credit, or convert the put into a put spread by buying a lower strike put to cap the remaining risk.
Decide the downside exit before entry, often at a loss equal to the credit received, since the position has no built-in floor below the short put.

Big Lizard FAQs

What is a big lizard options strategy?: A big lizard sells a put and a call at or near the current stock price and buys a further out-of-the-money call, collecting a net credit that equals or exceeds the width of the call spread. It is a short straddle with the upside risk removed. It profits from a volatility collapse and a stock that stays close to the short strike, and its risk is on the downside.
What is the difference between a jade lizard and a big lizard?: A jade lizard sells an out-of-the-money put and call spread, creating a range of maximum profit between the short strikes. A big lizard sells the put and call at or near the money with a wider call spread, collecting a larger credit but concentrating the maximum profit at one price. Both remove upside risk when the credit exceeds the call spread width, and both carry naked put risk.
How do you calculate max loss on a big lizard?: Maximum loss is the short put strike minus the net credit, multiplied by 100, and it occurs if the stock falls to zero. With a $100 short put and a $10.10 credit, that is $8,990. On the upside there is no loss, provided the credit is at least the width of the call spread.
Is a big lizard good for earnings?: It is one of the more common earnings structures because at-the-money implied volatility is highest right before the report and collapses right after. The large credit gives a wide cushion on the downside, and the long call removes the risk of a gap higher. The trade still loses if the stock gaps down by more than the credit.
Where is the breakeven on a big lizard?: There is only one, on the downside, equal to the short put strike minus the net credit. In the example that is $100 minus $10.10, or $89.90. There is no upside breakeven because the credit covers the call spread width, so any rally finishes with a small profit.
Can a big lizard lose money on the upside?: Only if the credit collected is less than the width of the call spread. In that case the maximum upside loss is the width minus the credit, times 100, reached at or above the long call. Traders typically adjust the long call strike or wait for better pricing so that the credit covers the width before entering.