A Reverse Jade Lizard, also known as a Twisted Sister, combines an uncovered short call with a Bull Put Spread. It mirrors the Jade Lizard: a sufficiently large credit covers the put spread width, while an unlimited risk remains if the stock rises.
Names and related structures: Twisted Sister; short call with Bull Put Spread.
Market Outlook
The trader expects neutral to mildly bearish price action. The full credit is retained if the stock finishes between the short put and short call. A large decline may leave a smaller profit; a large rally is the principal danger.
Position Construction
Buy one lower-strike put, sell one higher-strike put and sell one call above the short put. Use the same expiration and equal contract quantities.
| Action | Option | Expiration | Premium |
|---|---|---|---|
| Buy 1 | $90 put | Same expiry | $0.50 |
| Sell 1 | $95 put | Same expiry | $3 |
| Sell 1 | $105 call | Same expiry | $3 |
Example
With XYZ at $100, buy the $90 put for $0.50, sell the $95 put for $3 and sell the $105 call for $3. The position collects $550. At $100, all options expire worthless and the credit is kept. At $80, the put spread loses $500, leaving $50 profit. At $120, the uncovered call loses $1,500 before the credit, producing a $950 net loss.
All amounts use a 100-unit contract multiplier and exclude commissions and fees. These prices illustrate the arithmetic; they are not current market quotes.
Payoff Diagram
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| Underlying price | Expiration P/L |
|---|---|
| $0 | $50 |
| $80 | $50 |
| $90 | $50 |
| $95 | $550 |
| $105 | $550 |
| $110.50 | $0 |
| $120 | −$950 |
Maximum Profit
Maximum profit is the $550 credit, reached from $95 through $105 at expiration. Below $90, the credit less the $500 put spread loss leaves $50.
Maximum Loss
Maximum loss is unlimited. The short call loses another $100 for each $1 rise in the stock once the put options are out of the money. Buying a Protective Call would cap this risk, but would create a different four-leg position.
Breakeven Point(s)
The upper breakeven is call strike + credit = $105 + $5.50 = $110.50. There is no lower breakeven when the credit exceeds the put spread width. With a smaller credit, the put side can also lose money.
Risks and Position Management
The uncovered call can create a short stock position on assignment. Borrow costs, dividends owed on short shares and a continued rally can add losses. The put wing does not protect the call. Brokers may require substantial collateral and permission to sell uncovered options.
Before expiration, option prices also reflect time remaining and volatility. The expiration diagram does not show every interim gain or loss. Trading costs reduce profits and increase losses. Review the contract’s exercise and settlement rules before trading.
Explore the Position
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Related Strategies
Compare This Strategy
Optional further reading to help you compare the tradeoffs.
- Jade Lizard vs Reverse Jade Lizard — Identify which large move would hurt before comparing the credits.
Structure reference: Strategy reference. Example premiums and calculations are illustrative. Editorial standards.
Advanced Strategy Variations
Build on the core strategies with these less common structures. Match the option legs and expirations when comparing names.