Reverse Jade Lizard
Put spread with short call
Positions in Chart: Sell 1 lot of 25600 PE + Buy 1 lot of 25400 PE + Sell 1 lot of 26200 CE. Spot price: 25800
Setup
Sell OTM Put spread + Sell higher strike OTM Call
When to Use
- Bullish bias income
Market Outlook
Risk & Reward
Strategy Details
Description
A reverse jade lizard is an advanced three-leg income strategy that eliminates downside risk when properly structured, making it ideal for traders with bullish to neutral market outlook who want to generate consistent income. This strategy combines a short put spread with a short call, creating a position that has no risk below the lower put strike while generating substantial premium income. The key advantage is the elimination of downside risk, which makes it superior to traditional short strangles or iron condors in certain market conditions. Professional traders favor this strategy when they have high confidence that the underlying will not fall below a certain level but want to capture income from elevated implied volatility. The strategy requires careful strike selection to ensure the credit received exceeds the put spread width, creating the risk-free downside characteristic
Example
If NIFTY is at ₹25,800, set up: Sell ₹25,600 Put for ₹70, Buy ₹25,400 Put for ₹45, Sell ₹26,400 Call for ₹50, creating ₹75 net credit with no downside risk below ₹25,400 and maximum profit if NIFTY stays between ₹25,600-₹26,400.
This information is for educational purposes only and should not be considered as financial advice. Always consult with a qualified financial advisor before making investment decisions. Data is constructed and is not actual. Calculations may have errors.
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