Reverse Jade Lizard Strategy
Zero downside risk — the mirror Jade Lizard for bearish premium sellers.
What is the Reverse Jade Lizard Options Strategy?
A Reverse Jade Lizard (also called the "Twisted Sister") is the mirror image of a Jade Lizard. You sell an OTM call and combine it with a bull put spread (short put + long lower put).
The result: zero risk to the downside (if the credit exceeds the put spread width), but unlimited risk to the upside. This is for traders who are neutral to mildly bearish and want income without worrying about a market crash.
Why is it Called "Reverse Jade Lizard"?
"Reverse" because it flips the Jade Lizard — instead of zero upside risk, you get zero downside risk. Also called the "Twisted Sister" by tastytrade traders, because the payoff graph is a twisted/mirrored version of the Jade Lizard.
How Does the Reverse Jade Lizard Trade Work?
- 1 Step 1 — Pick a stock you are neutral to mildly bearish on, with high IV.
- 2 Step 2 — Sell an OTM call above current price.
- 3 Step 3 — Sell an OTM put below current price.
- 4 Step 4 — Buy a further OTM put below the short put (caps downside).
- 5 Step 5 — Verify: total credit > put spread width → zero downside risk.
Types of Reverse Jade Lizard Strategies
Reverse Jade Lizard (Standard)
Sell OTM call + Sell OTM put + Buy further OTM put. Total credit must exceed put spread width for zero downside risk.
When to Use the Reverse Jade Lizard Strategy?
- Neutral to mildly bearish with high IV
- When you fear a market crash more than a rally
- Stocks with strong resistance above the short call
- As a safer alternative to a short strangle when downside risk scares you
Profit and Loss of the Reverse Jade Lizard
Before looking at the chart, here is a plain-English summary of what you can make and what you can lose.
Net credit received.
Unlimited to the upside above the short call minus premium. Zero (or minimal) on the downside.
Short call strike plus net credit collected.
Reverse Jade Lizard Payoff Diagram
The chart below shows how profit/loss changes with the underlying price at expiry. Green zone = profit, red zone = loss.
Reverse Jade Lizard Example Trade
| Action | Type | Strike | Premium |
|---|---|---|---|
| Sell | Call | ₹22,500 | +₹80 |
| Sell | Put | ₹21,500 | +₹75 |
| Buy | Put | ₹21,000 | -₹30 |
NIFTY stayed at ₹21,800. All options expired worthless. Kept ₹125.
Pros & Cons of the Reverse Jade Lizard
- Zero (or capped) downside risk — rare for income strategies
- Benefits from time decay and IV contraction
- Great when you fear crashes but still want income
- Flexible — works neutral to bearish
- Unlimited upside risk — a surprise rally is dangerous
- 3 legs, moderate complexity
- Less common than Jade Lizard — less educational content available
- Needs margin for the naked short call
Reverse Jade Lizard Frequently Asked Questions
Quick Quiz
Answer all questions and check your score.
1 Reverse Jade Lizard (Twisted Sister) gives you:
2 Reverse Jade Lizard is built from:
3 The risk on a Reverse Jade Lizard is:
4 You'd choose Reverse Jade Lizard over Jade Lizard when:
5 Zero downside risk on a Reverse Jade Lizard is achieved when: