How do you calculate the breakeven on a reverse jade lizard?

There is one breakeven, on the upside, equal to the short call strike plus the net credit. In the example it is $110 plus $5.10, or $115.10. There is no downside breakeven when the credit covers the put spread width, because the trade finishes with a small profit at any lower price.

Is a reverse jade lizard risky?

Yes on the upside, where the naked short call has unlimited loss potential. Below the short call the risk is zero as long as the credit equals or exceeds the put spread width. Because upside gaps and squeezes can be violent, brokers require significant margin and many traders size the position smaller than they would a regular jade lizard.

Reverse jade lizard vs jade lizard: which should I use?

A jade lizard has naked put risk and no upside risk, suiting a neutral to bullish view. A reverse jade lizard has naked call risk and no downside risk, suiting a neutral to bearish view. The regular version is more popular because put skew makes it easier to collect a credit that covers the spread, and downside risk is easier to margin than unlimited upside risk.

What happens if the stock falls sharply in a reverse jade lizard?

The short call expires worthless and the put spread reaches its maximum loss, equal to its width. Because the credit is at least that width, the position finishes at breakeven or with a small profit. In the example a fall to $85 or lower leaves a $10 gain, since the $5.10 credit exceeds the $5 spread.

Reverse jade lizard vs bear call spread: what is the difference?

A bear call spread has defined upside risk because it buys a higher strike call, but it collects a smaller credit. A reverse jade lizard leaves the short call uncovered and adds a put spread for extra credit, giving a higher maximum profit and no downside risk but unlimited upside exposure. The bear call spread is the safer choice when a large rally is a realistic possibility.

Reverse Jade Lizard Calculator & strategy guide

Income & CreditAdvancedNeutralUndefined risk

Sell an OTM call and an OTM put spread to create a bearish-to-neutral credit strategy.

Payoff at expiration

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

Profit Loss Breakeven

Max profit: +$510; Net credit received
Max loss: Unlimited; Unlimited upside risk from the short call
Breakeven: $115.10; Short call strike + net credit

The trade · net credit $5.10 a share ($510)

Sell $110 call · $3.30
Sell $95 put · $4.60
Buy $90 put · $2.80

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

Open in Build

What is a reverse jade lizard?

A reverse jade lizard flips the standard jade lizard upside down. You sell an out-of-the-money call, sell an out-of-the-money put, and buy a further out-of-the-money put to cap the put side. The structure is a short call combined with a bull put spread in the same expiration. When the total credit collected is at least the width of the put spread, the trade cannot lose money on a decline, and the risk sits entirely above the short call.

The position is neutral to slightly bearish. It earns the full credit if the stock finishes between the short put and the short call, keeps a small profit on any drop below the long put because the credit covers the spread width, and starts to lose only when the stock rallies past the short call plus the credit. Above that breakeven the naked short call loses dollar for dollar without limit.

The payoff diagram is a short call with the downside flattened. It runs flat at a small positive value on the left, steps up by the width of the put spread to a plateau equal to the full credit, and then slopes down without limit on the right. It is used far less often than the regular version, because put skew makes the put spread expensive and unlimited upside risk is harder to margin. It fits a trader who is willing to be short the stock above a specific level.

Setup

Leg	Strike	Expiry
Sell 1 call	2 strikes OTM	Near
Sell 1 put	1 strike OTM	Near
Buy 1 put	2 strikes OTM	Near

Reverse Jade Lizard example

XYZ trades at $100 with 45 days to expiration and elevated implied volatility. You sell the $110 call for $3.30, sell the $95 put for $4.60, and buy the $90 put for $2.80. Total collected is $7.90 and total paid is $2.80, so the trade opens for a net credit of $5.10 per share, or $510. The put spread is $5 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 $510 credit, the maximum profit. The same is true anywhere between $95 and $110.
$85 (large drop)	The $110 call expires worthless. The short $95 put costs $10.00 ($1,000) and the long $90 put is worth $5.00 ($500), so the put spread loses $500. P&L is $510 minus $500, or $10, and it stays at $10 for any price below $90.
$115.10	Breakeven. The puts expire worthless and the $110 call is $5.10 in the money, costing $510, which exactly cancels the credit.
$120	The puts expire worthless. The $110 call is $10.00 in the money, costing $1,000. Loss is $1,000 minus the $510 credit, or −$490. Each further dollar of rally adds $100 to the loss.

Maximum profit is $510 if XYZ finishes between $95 and $110. There is no downside risk because the credit exceeds the $5 put spread width, leaving a $10 profit even if XYZ falls to zero. The only breakeven is $115.10, and losses above it are unlimited.

When to use a reverse jade lizard

You are neutral to mildly bearish and would be comfortable being short the stock at the short call strike if assigned.
Call implied volatility is elevated, as happens in stocks with heavy call speculation or upside event skew, so the short call brings in a meaningful credit.
You want to sell a call but would like additional credit to raise the breakeven, without adding any risk on the downside.
You already hold a long stock or long call position elsewhere that offsets the upside exposure of the short call, turning the trade into a covered structure.
Typical entries use 30 to 60 days to expiration, sell the call around the 20 to 30 delta above resistance, and place the put spread just below support with a $2.50 to $5 width.

Risks to understand

Upside risk is unlimited. A takeover bid or a short squeeze can push the stock far above the breakeven, and the naked call loses $100 per dollar with no cap.
Put skew makes the long put expensive relative to the short put, so covering the put spread width with credit is harder than in a regular jade lizard. If the credit falls short, the trade has a defined downside loss equal to the shortfall.
Margin on a naked short call is high and can increase sharply as the stock rallies, potentially forcing a close at the worst time.
A rise in implied volatility inflates the short call and short put, producing a mark-to-market loss even when the stock is inside the profit range.
The short call can be assigned early once in the money, especially before an ex-dividend date, leaving you short stock with no protection against a further rally.

Managing the trade

Close at 50 percent of the maximum credit rather than holding to expiration, because the upside has no floor and the last half of the credit is not worth the tail exposure.
If the stock drops through the put spread, leave it alone. The credit already covers the width and the result below the long put is a small profit.
If the stock rallies toward the short call, roll the call up and out to a later expiration for a credit, or roll the put spread up to collect more premium and raise the breakeven.
Set an upside stop at about two times the credit received or at a technical level above the short call, and honor it, because losses above the breakeven are unlimited.
Consider buying a far out-of-the-money call when the stock starts to trend higher, which converts the position into an iron condor style structure with defined risk.

Reverse Jade Lizard FAQs

What is a reverse jade lizard?: A reverse jade lizard sells an out-of-the-money call and an out-of-the-money put spread in the same expiration, collecting a credit that is at least the width of the put spread. That condition removes all downside risk. The trade profits if the stock stays flat, falls, or rises modestly, and loses only on a sharp rally above the short call.
How do you calculate the breakeven on a reverse jade lizard?: There is one breakeven, on the upside, equal to the short call strike plus the net credit. In the example it is $110 plus $5.10, or $115.10. There is no downside breakeven when the credit covers the put spread width, because the trade finishes with a small profit at any lower price.
Is a reverse jade lizard risky?: Yes on the upside, where the naked short call has unlimited loss potential. Below the short call the risk is zero as long as the credit equals or exceeds the put spread width. Because upside gaps and squeezes can be violent, brokers require significant margin and many traders size the position smaller than they would a regular jade lizard.
Reverse jade lizard vs jade lizard: which should I use?: A jade lizard has naked put risk and no upside risk, suiting a neutral to bullish view. A reverse jade lizard has naked call risk and no downside risk, suiting a neutral to bearish view. The regular version is more popular because put skew makes it easier to collect a credit that covers the spread, and downside risk is easier to margin than unlimited upside risk.
What happens if the stock falls sharply in a reverse jade lizard?: The short call expires worthless and the put spread reaches its maximum loss, equal to its width. Because the credit is at least that width, the position finishes at breakeven or with a small profit. In the example a fall to $85 or lower leaves a $10 gain, since the $5.10 credit exceeds the $5 spread.
Reverse jade lizard vs bear call spread: what is the difference?: A bear call spread has defined upside risk because it buys a higher strike call, but it collects a smaller credit. A reverse jade lizard leaves the short call uncovered and adds a put spread for extra credit, giving a higher maximum profit and no downside risk but unlimited upside exposure. The bear call spread is the safer choice when a large rally is a realistic possibility.