The dangerous yellow-spotted lizard is described. The lizards have eleven yellow spots, which are hard to see on their yellow-green body. They have black teeth, and white tongues. They like to live in holes, which offer them shade, and they can leap out of even very deep holes in order to attack their prey. In addition to small animals, insects, and cactus thorns, the lizards like to eat sunflower seeds.
Stanley, exhausted after digging his first hole, returns to camp. He enters the recreation room, which is called the wreck room. Everything in the wreck room is broken. Stanley bumps into a large boy who tries to pick a fight with him. Stanley tries to avoid the fight and X-Ray and Armpit come to his rescue saying, "You don't want to mess with the Caveman." Stanley, Armpit, Squid, and X-Ray talk about the trouble of digging holes. Stanley has brought his box of paper to the wreck room because he wants to write a letter to his mother. When he explains to Squid that his mother will worry if he doesn't write to her, Squid scowls at him. Stanley notices that the entire room is wrecked because the boys themselves have broken the things in it. Stanley waits until Squid leaves before writing his letter. When Stanley does write to his mother he tells her he is having fun and swimming a lot. In the middle of writing his letter Stanley notices that Zero is staring at his letter. Zero asks Stanley, "Did the shoes have red X's on the back?" Stanley responds that they did and then hears Armpit and Squid calling Caveman to come to dinner. Stanley realizes that his nickname is Caveman.
Stanley's second hole is also very hard to dig. While he is digging he finds the fossil of a fish. He has been told by Mr. Pendanski that if he finds anything interesting he might not have to finish his hole. When the water truck comes Stanley notices that there is always an order to the line, with X-Ray followed by Armpit, Squid, Zigzag, Magnet, Zero, and then Stanley. Stanley shows the fish fossil to Mr. Pendanski but Mr. Pendanski says that the fossil is not what the Warden wants. Stanley has to finish digging his hole.
X-Ray asks Stanley to give him anything else interesting that he might find. X- Ray explains that his nickname is pig latin for his real name, Rex. Actually X- Ray has very poor vision and will never be able to find anything that might be in the holes. X-Ray says that since he has been at the camp for a year and Stanley has only been there a month, it is more important for X-Ray to get the day off. Stanley agrees because he wants X-Ray to like him. Stanley wonders why everyone follows what X-Ray does. He realizes that X-Ray is the smallest boy apart from Zero and that he, Stanley, is actually the largest boy. As Stanley continues to dig his hole he imagines a confrontation between his school bully, Derrick Dunne and the boys here. He enjoys thinking of Derrick Dunne, who has so often tormented Stanley, being beaten up by the boys from the camp.
When Stanley finishes digging his second hole he returns to camp to find Mr. Pendanski talking with the boys in his group. Mr. Pendanski asks each boy what he wants to do as a career, after leaving Camp Green Lake. When Mr. Pendanski says that even Zero is not totally worthless and then asks Zero what he would like to do when he leaves Camp Green Lake. Zero is silent at first but then he replies that he likes digging holes.
This section develops the relationship between the narrative and fairy tales. The yellow-spotted lizards embody many of the fears that most people have. Not only are they hideous looking and dangerous, but they hide in holes, where the boys spend most of their time. They are a constant menace and because they like to eat sunflower seeds (which are what Mr. Sir constantly spits into the boys' holes), the reader can guess that they will soon appear as a threat to at least one of the characters. Combined with the ever-present threat of the Warden, the dry heat, and the task of digging holes day after day, the lizards form an environment closer to hell than even Little Red Riding Hood experienced after being eaten by a wolf.