What is a Twisted Sister?

A twisted sister is the jade lizard flipped across the price. Instead of capping the call side, you cap the put side: sell an out-of-the-money call, sell an out-of-the-money put, and buy a further-out put — all for a net credit. When the credit covers the put-spread width it removes the downside risk, but the short call is naked, so the upside loss is unlimited.

How is a twisted sister built?

Three legs, one expiration, one underlying:

• Sell a call above the current price (your naked short call) — this is the income, and the unlimited risk.
• Sell a put below the price, and buy a further-out put below that — a put spread that caps the downside.

You open it for a net credit, kept in full whenever the stock finishes between the short put and short call. Size the credit to be at least the put-spread width and the downside risk disappears — leaving only the naked call above.

The payoff: no downside risk, unlimited upside

• Max profit = the net credit, kept whenever the stock finishes between the two short strikes.
• The downside = if the credit covers the put width, a crash leaves you with credit minus width — a small profit, not a loss. There is no downside breakeven.
• The upside = unlimited. Above the upside breakeven (call strike plus credit), the naked call loses with no cap.

A worked example

A stock trades at $100. With 45 days left you sell the 105 call for $1.50, sell the 95 put for $1.20, and buy the 93 put for $0.40 — a $2.30 net credit against a $2.00-wide put spread.

• Net credit / max profit: $2.30 × 100 = $230, kept between $95 and $105.
• No downside risk: credit $2.30 ≥ width $2.00, so even below $93 you keep $30.
• Upside breakeven: $105 + $2.30 = $107.30 — above it the loss is unlimited.
• Max loss: unlimited on a rally; the downside is fully covered.

Why it is riskier than a jade lizard

The two are mirror images, but the mirrors are not equal. A jade lizard's open side is the downside, which is bounded — a cash-secured put can only lose to zero. A twisted sister's open side is the upside, which is unbounded — a stock can double on a buyout or a squeeze with no ceiling. So while a jade lizard suits a bullish-to-neutral name you would own, a twisted sister is a neutral-to-bearish bet reserved for names you are confident will not run, managed actively, and sized small.

When a twisted sister makes sense

Rarely — and only on a liquid, neutral-to-bearish name with rich implied volatility and no upside catalyst, in an account with the approval and margin for a naked call. Avoid anything that could be acquired, squeezed or gapped up. Roll the short call up and out before the stock pressures it, set a hard stop, and size tiny. If that sounds like more than you want to babysit, a defined-risk iron condor makes a similar range bet with a floor under the loss.