The Jade Lizard is an options trading strategy that combines two other strategies: a short put spread and a short call. It is designed to generate income with limited risk. Here's how the Jade Lizard strategy is constructed:

1. Short Put Spread:

   • Sell an out-of-the-money put option.
   • Simultaneously buy a further out-of-the-money put option for downside protection.

2. Short Call:

   • Sell an out-of-the-money call option.

The key characteristic of the Jade Lizard is that the premium received from the short call is used to partially or fully offset the premium paid for the long put, resulting in a net credit.

The profit and loss outcomes for a Jade Lizard are as follows:

• Maximum Profit: The net premium received when entering the trade is the maximum profit. It occurs if the underlying stock closes above the short put strike at expiration.

• Maximum Loss: The maximum loss occurs if the underlying stock closes below the long put strike at expiration. The loss is limited to the difference in strike prices between the short put and long put, minus the net premium received.

• Breakeven Points:

  • On the upside, there is no specific breakeven point because the strategy involves a short call, which means there is unlimited risk to the upside.
  • On the downside, the breakeven point is the strike price of the short put minus the net premium received.

Here are the steps to implement a Jade Lizard:

1. Select a Stock:

   • Choose an underlying stock with options that have sufficient liquidity.

2. Choose Options:

   • Sell an out-of-the-money put option.
   • Buy a further out-of-the-money put option for downside protection.
   • Sell an out-of-the-money call option.

3. Check Risk-Reward:

   • Ensure that the net credit received is worth the risk taken.

4. Monitor the Trade:

   • Keep an eye on the stock's price movement and adjust the position if necessary.

The Jade Lizard is a strategy for traders who are moderately bullish on the underlying stock and want to generate income while limiting risk. It's important to be aware of the risks involved, especially the unlimited risk to the upside due to the short call position. As with any options strategy, it's recommended to fully understand the mechanics and risks involved or consult with a financial professional before implementing it.