Jade Lizard
A jade lizard writes a put below the market and a call above it, and buys a higher call so that the written call becomes a call spread. The worked example writes the FTSE 100 October 10,400 put and 11,100 call and buys the 11,200 call for £1,150.00. Because that credit exceeds the call spread's 100-point width, the position makes £150.00 before costs however far the index rises. It keeps a written put's loss on a fall: £102,855.10 at an index of zero, −£17,034.65 marked on a 20% gap. It gives up any gain beyond the credit. It is built for an index expected to stay above a level, where a sharp rally is the risk to be removed.
This page assumes the reader knows the bear call spread and the short strangle; the lizard is a strangle whose call has been capped. Every figure is modelled on the library's model sheet, not quoted from a live chain: inputs and method.
Three October legs on the FTSE 100, and the one subtraction
The put supplies 79% of the credit. The whole structure rests on one line of arithmetic. Above 11,200 at expiry the put is worthless and the two calls together cost exactly their 100-point width, £1,000. The position has already received £1,150.00, so what is left is £150.00 (the credit is 1.15 times the width); after the £5.10 opening commission, £144.90. If the credit were smaller than the width, a rally would produce a loss, and the position would be a short strangle with part of its call capped. That test has to be run again after any change to the position, because a roll can move either number.
The FTSE 100 option (ICE code ESX; FTSE 100 contracts) is European and settles in cash against the Exchange Delivery Settlement Price, so no leg can be exercised early and nothing is delivered; trading in the expiring series stops shortly after 10:15 on the third Friday. The Mini FTSE 100 daily options (8LX, £1 a point) list only the next five daily expiries plus one third-Friday expiry, so a 45-day version cannot be built on them; contract sizes for every product are on the options basics page. The two written legs (a short put and a short call spread) sit at IBKR's Options Level 3, and the spread needs a margin account (account types and permissions).
Open this worked example in the strategy builder. The builder solves each leg's volatility from the three fills, so its lines match this page's to within the half-tick rounding.
Payoff: an uncovered put on the left, a £150.00 shelf on the right
Read the table from the bottom. Every settlement above 11,200 pays the same £150.00; between the two call strikes the result falls from +£1,150.00 to that shelf; between the put and the short call the whole credit is kept. Below the 10,285.0 breakeven, 4.3% under the entry level, the position loses £10 for every point, exactly as a written put alone would. The dashed and dotted lines in the chart show the same shape blurred by time value: on the entry day a fall to 10,234 (one standard deviation) with volatility two points higher is marked at −£2,265.09, not the −£511.73 it would cost at expiry, because 45 days of volatility still sit in the put.
Where the proof comes from: the index put is priced higher than its calls
FTSE 100 options are not priced at one volatility. On the library's model surface (skew explained) implied volatility falls as the strike rises: 15.32% at the 10,400 put, 12.72% at the 11,100 call. The table reprices the same three strikes on the same day with the at-the-money volatility held at 14% and only the slope changed, from a flat surface to one twice as steep as the model's.
The lesson in the chart is where the money comes from. The call spread pays between 22.58 and 24.60 points whatever the slope, because both of its calls move down the surface together. The put carries the whole difference: on a flat surface it is worth 75.09 points and the total falls 2.33 points short of the width, so a jade lizard at these strikes does not exist; once the put's volatility sits about 0.35 of a point above the call's (a slope of about 0.054), the credit reaches 100 points, and on the model surface it is 114.93. A lizard therefore needs a chain on which downside protection is dear. The library's model sheet gives BP no skew at all, which is one reason the BP version below struggles. The credit comes from selling that expensive protection, so the risk being paid for is the fall the put insures, not the rally.
Choosing the call wing: 50, 100, 150 or 200 points
With the put at 10,400 and the short call at 11,100, the only free choice is how far above 11,100 the long call sits. A wider wing costs less, so the credit rises; but the width rises faster than the credit, and the test turns against the position between 100 and 150 points.
The two widest wings collect the most on the ticket (124.5 and 132.5 points against 115.0), and both lose on a rally: −£255.00 above 11,250 and −£675.00 above 11,300. The narrowest collects 104.0 points and keeps +£540.00 above 11,150, but earns 11.0 points less than the 100-point version anywhere between the strikes. The downside breakeven barely moves across the menu, from 10,296.0 to 10,267.5, because the put, not the wing, sets it. A larger credit on the ticket is not the same thing as a better position.
Stress and margin: what a fall does to the requirement and the equity
The upside is settled by the subtraction above. Everything else about the position is the uncovered 10,400 put, and the way to see it is the stress table: the index moved instantly on the entry day, the volatility surface kept by strike (sticky-strike) with a stated parallel shift, and the broker's requirement recomputed at the new prices. The method is on the Level 3 stress-test page.
The requirement column uses the Cboe and FINRA strategy-based formulas, which can be recomputed by hand; an ICE option at a UK broker is margined on the broker's own model, and its order preview gives the figure that applies. For an uncovered index put the formula is the option's value plus 15% of the index level less any out-of-the-money amount, with a floor of 10% of the strike. A written put and a written call on the same index are margined as one combination: the larger side's requirement plus the other side's value (FINRA Rule 4210(f)(2)(G)(i)), applied here with the call spread as the other side. At entry that is £13,775.00: the put side is £13,535.00 (its 10% floor, £11,310.00, does not bind), and £12,625.00 of it is buying power beyond the credit already received. A broker that charges the two sides separately would add the full 100-point width instead, £14,535.00 (uncovered margin formulas).
Two things happen in the down rows at once. The loss grows, and the requirement grows with it: 58% higher after a two-standard-deviation fall and 126% higher after the 20% gap, when the out-of-the-money deduction disappears and the put's own value multiplies. The last column is the sum of the two: an account that started below £48,114.20 would be under its requirement after the gap and open to liquidation at that day's prices (the margin spiral). The up rows show the reverse, which no short strangle can: two standard deviations higher, the requirement is 17% lower and the position is still in profit. The FTSE 100's own falls of a size that makes the first row plausible are listed on the Level 3 page (gap history).
The October lizard from 1 September to 16 October 2026
Branch A: half the credit on Thursday 17 September
The index has risen to 10,900 with 29 days left and the surface has eased by one point. The legs are worth 25.22, 67.98 and 40.17; on the tick the lizard buys back for 53.0 points, inside the 57.5 that marks half the credit, so a writer following the library's half-credit convention closes all three legs in one order.
Holding on instead would have kept up to £535.10 more (+£1,144.90 against +£609.80) if the index settled between the put and the short call, a model probability of 57.0% from that day (risk-neutral, from the surface one point lower), with a 6.5% model probability of finishing below the breakeven.
Branch B: the put is tested on Friday 25 September, and the call spread is rolled down
The index has fallen to 10,400, on the put strike, with 21 days left, and the whole surface is three points higher. The put is worth 179.91 and the call spread only 7.09 less 3.36: the lizard marks 183.63 points, a £686.33 loss (60% of the credit), and it is now long £4.66 for every point, the exposure of about £48,439 of index held outright. The requirement has risen to £17,436.33. This worked plan's two-times-credit stop would fire only if the lizard marked 345.0 points, a £2,300.00 loss, so it has not fired; the 21-day convention says close or adjust.
The roll works because it keeps the width at 100 points. The tempting variant writes 10,800 and buys 10,950 (at 18.5) instead: it collects 19.0 points rather than 13.0, but the total of 134.0 is now tested against a 150-point width and fails by 16.0 points. Above 10,950 at expiry that position loses £160.00 before costs, with an upside breakeven at 10,934.0. The larger credit bought back the rally risk the structure was built to remove. Held unchanged instead, the October lizard would still make +£1,144.90 if the index settled at 10,400, and lose £855.10 at 10,200. How rolls are priced and taxed in general is on the rolling page.
Branch C: a 20% gap on Tuesday 8 September
The index opens at 8,600 with 38 days left and every volatility on the surface 20 points higher, the same shift as the stress table. The put is worth 1,808.30 points and the two calls almost nothing (2.71 and 1.90). Closing at those values:
There is no roll that pays for this. The call spread is worth a few pounds, and the put is 1,800 points in the money; any new written option would add a second obligation to the first.
Branch D: the wing moved out at entry
The same put and short call, but the 11,250 call bought instead of the 11,200 because it is cheaper. The credit rises to 124.5 points (£1,245.00, £95.00 more), and the width to 150. Above 11,250 the result at expiry is −£260.10 after the opening commission, with an upside breakeven at 11,224.5. The wing menu above shows the same failure from the other side.
Greeks: short volatility first, short gamma later
On the first day volatility dominates: a one-point rise across the surface costs £140.44, and at that rate a ten-point rise would cost about 122% of the credit before the index moved at all. By the final week the vega has shrunk to −£25.32 while theta is still +£26.21 a day, and the result depends on where one auction settles. The delta row shows the asymmetry that sets the management problem. A rally drains the delta to −£0.32, because the short call catches up with the put; a fall raises it to +£5.62 a point, the exposure of holding about £57,510 of index. The position is close to flat when the view is right and increasingly long when it is wrong. Units and the general pattern are on the position Greeks page.
The big lizard: both short strikes at the money
A big lizard writes an at-the-money straddle and buys a call above it: here the October 10,750 put and 10,750 call, with the 11,000 call bought. It is the short straddle with its call side capped, and it passes the same test only if the credit exceeds the call spread's width, 250 points. Priced on the same surface and filled on the tick: put 205.5 (14.00% IV), call 214.5, 11,000 call 101.0 (13.08%), for a credit of 319.0 points, £3,190.00. The test passes by 69.0 points, £690.00, and after the opening commission every settlement above 11,000 makes £684.90. The single breakeven is 10,431.0, 3.0% below the entry level; the maximum, £3,184.90, needs a settlement at exactly 10,750. Open it in the builder: big lizard example.
The 350-point wing is the edge case. At model values it passes by 0.275 points, £2.75, which is less than one 0.5-point tick (£5.00); on the tick it passes by half a point, and a single tick of slippage on any of the three legs would erase it. The 400-point wing fails outright. The test is decided on executable prices, not on model values.
Profit targets against the 21-day mark. The at-the-money body decays late. On Friday 25 September, with 21 days left and the surface unchanged, the big lizard shows +£785.55 at 10,750, 24.6% of the credit, and +£942.82 (29.6%) at 10,850; the most it shows at any index level that day is 31.4%, at 10,975, or 35.2% at that level if the surface has also fallen two points. Half the credit is £1,595.00 and 40% is £1,276.00, so a 50% or even a 40% profit convention rarely fires before a 21-day convention does on these inputs. The two conventions pull against each other; the methods page gives the origin and evidence status of both.
A tested big lizard and the roll test. On Friday 18 September, with 28 days left, the index is at 10,350 and the surface three points higher. The lizard marks 494.51 points, a £1,755.08 loss (55% of the credit), and it is long £6.49 a point. Rolling the tested put down and out, buying back the October 10,750 at 453.5 (17.00% IV) and writing the November 10,550 at 407.5 (17.75% IV, 63 days), costs £460.00, a debit, so a writer who rolls only for a credit would not roll. A one-times-credit stop would fire at a loss of £3,190.00: on the entry day that is an index of about 10,157 with the surface unchanged, or 10,212 with it three points higher, in both cases below the 10,431.0 breakeven and a little above 10,112, the level at which the loss would equal the credit at expiry: the put's remaining time value marks the loss up early.
The same comparison on one surface. The table sets the two lizards beside the short straddle and the iron butterfly built on the same 10,750 strikes (the butterfly also buys the 10,500 put at 116.0).
Three readings stand out. The big lizard collects £3,190.00 against the straddle's £4,200.00: the £1,010.00 wing is what turns the straddle's unlimited call-side loss into a £684.90 floor. On the 20% gap the big lizard does worse than the straddle it came from, because the wing it paid for is worth nothing in a crash and the premium spent on it is gone. And the iron butterfly, which caps the put side as well, loses £409.52 on the same gap for a requirement of £2,500.00; its price is a model probability of profit of 29.9% rather than 75.8%. The lizards share one property with a 1×2 ratio spread opened for a credit: one side of the payoff can be shown to be loss-free at expiry by a subtraction before the trade (ratio spread). Neither lizard's loss-free side says anything about the other side, or about any day before expiry.
The reverse jade lizard: a written call over a put spread
Turned upside down, the structure writes a call and writes a put spread below the market; if the credit exceeds the put spread's width, a fall cannot lose money at expiry and the uncovered risk sits above. On the model surface the skew works against it.
The written put spread pays only 20.19 points because the 10,300 put bought to cap it sits even higher on the skew than the 10,400 put written. With the call at the same distance as the jade lizard's, the test fails by 10.19 points on the model surface and passes on a flat one. To pass on the model surface the call has to come in to 11,000, a delta of 0.32, so the uncovered side of a reverse lizard starts closer to the market than a jade lizard's put does. The shape of the surface decides which lizard is available.
On one share: BP on ICE, and a US share in dollars
BP. BP is used as a model underlying at an illustrative 530p (it closed at 519.6p on 17 August 2026; price data: Yahoo Finance); this is not a view on BP. A 60-day October lizard, written 17 August, sells the 500 put and the 560 call and buys the 570 call, a 10p call spread on the 1,000-share ICE contract (BP has no 100-share mini). BP's next ex-dividend date is 12 November (bp financial calendar 2026), after the October expiry, so no dividend enters these prices. At a flat 26% the legs are worth 9.04p, 11.97p and 9.24p; filled on the 0.25p tick at 9.00p, 12.00p and 9.25p, the credit is 11.75p (£117.50) and the test passes by 1.75p, £17.50, 7 ticks. Opening costs then take it away: half of an illustrative 1.00p quote on three legs is £15.00 and three commissions of £1.40 are £4.20, so after £19.20 the rally result is −£1.70. If BP carried the FTSE surface's slope (an assumption for illustration: 28.3% at the 500 put, 23.8% at the 560 call), the credit would be 13.75p and the margin 3.75p, £37.50. The model sheet sets BP no skew, so the flat case is this page's base case.
Two further differences come with a share. The options are American and deliver shares: a deep in-the-money 500 put can be assigned before expiry, and assignment means buying 1,000 BP at 500p, £5,000.00, with 0.5% SDRT of £25.00 paid by the put writer as the buyer (early put assignment; who pays SDRT). A BP big lizard, the 530 straddle at 20.75p and 24.00p with the 560 call at 12.00p, collects 32.75p against a 30p wing and passes by 2.75p, £27.50 or 11 ticks, before the same costs; its at-the-money put is close to an even chance of delivery, with £26.50 of SDRT if it is.
A US share. On a hypothetical US share at $150 paying no dividend in the window, 60 days, a flat 30% IV and a dollar rate of 3.625%, the 145 put, 160 call and 165 call are worth $4.620, $3.820 and $2.567; filled at $4.60, $3.80 and $2.55 the credit is $5.85 a share, $585.00 a 100-share contract, against a $5 wide call spread: a margin of $85.00, £62.69 at the entry rate below. With the put at 140 the credit would be $4.16 and the test would fail. In sterling the premiums are converted at the rate on the day they are received, and anything paid at expiry at the rate on that day (the FX rule). At an illustrative $1.3559 per £1 on 17 August 2026 (ECB reference-rate cross) the credit is £431.45; if the $500 call spread width were paid at the $1.3344 of 18 September 2026 (the same source), it would cost £374.70 rather than £368.76, leaving £56.75. The dollar result stays positive at any rate; the sterling result would turn negative only below about 1.159 dollars to the pound. Commission is $3.00 for the three one-contract legs, £2.21 at $1.3559 (IBKR's $0.65 a contract falls below its $1.00 minimum, which applies to each leg of a combination order), and US option gains carry no US withholding (W-8BEN and US tax).
Adjusting the lizard: what each convention did, in pounds
None of these is a rule; each exchanges one set of pounds for another, and the origins and evidence of the conventions are on the methods page. The library's 2% sizing line on a £50,000 account is £1,000 of maximum loss; a position with an uncovered put has no fixed maximum below £102,855.10, so the sizing framework measures it by its stress rows instead.
UK tax: two grants, one bought call, and a rally across 5 April
Each written leg is a disposal on its grant date, 1 September 2026, with any buy-back folded in (TCGA 1992 s148). Cash settlement dates a written call's result at settlement (s144A(2); HMRC CG12321) and makes the bought call's settlement a disposal of the right to payment (s144A(3); CG12322). Figures assume the £3,000 annual exempt amount is used elsewhere, at 18% or 24% by the basic rate band left (general rules).
The trap here is a rally across a tax year end. With the same premiums collected on Wednesday 3 March 2027 and a settlement at 11,500 on Friday 16 April 2027, the lapsed put's grant stands as a +£908.30 gain in 2026/27 (£163.49 at 18%, £217.99 at 24%), while the two calls, dated at settlement, make −£763.40 in 2027/28. The profit is the same, but the gain is taxed a year earlier and the loss only carries forward (across 5 April). Options cannot be held in an ISA, and we could not find a UK SIPP administrator that allows them (checked 26 September 2026): ISA, SIPP and GIA.
Costs in pounds, and how much slippage the test survives
The 15.0-point margin has to absorb the costs of the trades that create it. Held to settlement there are three crossings, one per leg, so the test survives an average of 5.0 points of slippage per leg; closed before expiry there are six, and the average falls to 2.5. On the single share above the margin was 7 ticks and the costs were larger than that, which is the practical difference between an index lizard and a share lizard.
Other ways to take a similar view
Each row changes one thing. The condor and the bull put spread buy the 10,300 put at 70.5 points, which turns the lizard's open-ended downside into a number fixed on the first day and takes most of the credit with it. The strangle keeps the extra call premium and gives up the test. Index positions held through spread bets and CFDs, which are taxed and margined differently, are compared on the three-way comparison page. Buying FTSE 100 puts to protect a portfolio, the other side of the put this page writes, is worked on the portfolio hedging page.