Big Lizard Calculator
A big lizard sells an at-the-money straddle and buys an out-of-the-money call to cap the upside. When the credit collected is at least as large as the call-spread width, the upside risk disappears entirely — you keep premium if the stock stays near the strike, with risk only on the downside.
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Key characteristics
- Sell the ATM call and put, buy an OTM call: a short straddle with the upside capped.
- If the credit ≥ the long call’s distance, there is no upside risk at all.
- Max profit is the net credit, kept when the stock pins the short strike.
- Downside risk remains from the short put — size it like a cash-secured put.
When to use a big lizard
Use it when you are neutral and want short-straddle income without the open-ended upside risk of a naked call. The long out-of-the-money call turns the unlimited upside into a defined, often zero, risk above the strike.
Traders size the long call so the premium collected covers its distance from the short strike — when that holds, the position simply cannot lose money to the upside, only to the downside if the stock falls.
Risks and management
The whole risk sits below. If the stock drops, the short put behaves like a cash-secured put and losses build, so keep enough capital to be assigned and manage the put if the stock breaks down.
As a short-volatility trade it is hurt by a big move down or an implied-volatility spike. It works best on range-bound names and is often closed early once most of the premium has decayed.
Calculate it live
Use the free OptionProfit Big Lizard calculator to load a live option chain, build the trade, and instantly see the payoff chart, breakevens, probability of profit, Greeks and a Monte Carlo simulation of outcomes.
- A short ATM straddle with the upside capped by a long OTM call.
- No upside risk when the credit covers the long call’s distance.
- Max profit is the credit, at the short strike; risk is all on the downside.
- Treat the short put as a cash-secured commitment and manage breaks lower.
Frequently asked questions
Why is it called a big lizard?
It is the wider cousin of the jade lizard. A jade lizard sells a put plus a call spread; the big lizard sells the full ATM straddle and adds a long call to remove the upside risk.
Is there really no upside risk?
Only when the net credit you collect is at least the distance from the short strike to the long call. If you collect less than that width, a small capped upside loss remains.
Where do I lose money?
To the downside. The short put is unhedged below, so a falling stock is the real risk — exactly like holding a cash-secured put at the strike.
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