Do NOT Trade The 112 or 111 Options Strategy Until You Watch This!
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Why does a 111 or a 112 have a stop loss at all? The only thing you have to worry about is buying power expansion if its on /MES or /ES, 8% drop is around 300% increase in buying power to carry the 111 or 112 spreads. Can buy a far out of the money long put to reduce the buying power. Also the strategy is to stagger the spreads each expiration cycle. So the previous spread protects the most recent spreads. Thats the strategy. It's not meant to be a one off trade, or taken off at a stop loss amount. 4x stop loss is stupid its going to get triggerd in a big one week sell off. Stop trading bigger size than you should and you wont have to worry about a stop loss/draw down before expiration.
I do 1-1-2-2, as you rightly said.
Nice, the 1122 is a solid trade!
I agree that the 112 is a great strategy that almost never hits the short puts but there are times (very rarely) where it will and you will lose a lot so might as well have a stop loss for good measure. Or turn the trade into a 1122
Yeah, either have a stop loss in mind or enough buying power to take assignment and stay in the game when IV and SPAN requirements expand.
@@kashifrit What does the extra 2 represent? Another Put spread?
Lots of traders are learning the difference between P&L Theory & P&L Expiration this week.
Very true! Wish people understood this better before actually experiencing it.
ES UNA ESTRATEGIA MUY SEGURA, este video es alarmista, solo tienes que saber cerrar el spread en positivo y rollear si fuera el caso los naked put, no hay riesgo si lo haces con un activo como el /es o /mes
This channel seems awfully high quality. It's one of the very few places where, not only is the content great, but the commenters and youtubers have incredibly insightful dialog!
Thank you brother! I really appreciate that :)
Thanks for creating this video. I have seen most of the videos and it felt misleading. This will help new Options traders.
Glad it was helpful!
Yep gamma risk is high. You can hedge by creating a 1121 trade
What's the last one? Long put even further out?
Gamma risk is low at 120DTE, vanna risk on the other hand 😉
Or even a 1122 but you sacrifice profits to help mitigate gamma risk
Love the content and explanation on how to protect oneself using the hedges. The question I have is what is a good I.V. level to place the trade? You mentioned don't place them at 10% or below. Does that mean 10% or above is okay to place the trade? One other question about the hedges, If you remove the short put from the debit spread that leaves you with 1 more short put in the case of a 1-1-1 trade which in reality leaves and a wider new spread that the long put can profit from if I'm understanding correctly. In the case of a 1-1-2 removing the put from the debit spread leaves you with 2 short puts. Are you saying the long put will make a big enough profit to offset the losses from the 2 remaining short puts because the long put has made a big profit? Trying to make sure I'm understanding correctly. Thanks.
I do this strategy, I've learned how to hedge out to decrease front end risk. Nonetheless, there's always risk
I agree! That’s why I have on hedges to help eliminate this risk
It kinds seems like Russian Roulette...but with about 25 barrels - a wrong move and you are wiped out!--- but very interesting concept; thank you!
That's what stop losses are for
@@AustinBouley Who wants to catch a falling knife when the market is crashing?
This should've been included with the first video about this trade setup
😂
I thought people understood how to read the profit and loss curve until one of my office hours calls on Zoom. So, I explained it to them and decided to make a TH-cam video on it as well. I apologize, but glad you enjoyed this video :)
Completely agree, but it's good that he has a separate video to attract attention to this problem (thanks, Austin). The main proponents of the 112 don't mention the gotcha of this strategy.
Why not place the debit spread at 30 day increments, while placing the naked puts at 90 days. Gamma will move the debit spread at a faster rate.
You can do that! I prefer to keep ratio spread hedges on instead.
Excellent idea! I'm going to try this.
Can you show us how to put a stop loss on this trade on the tasty trade platform. I'm a bit confused on how that works. Is that a mental stop loss or a bracket order you can implement on the trade as it is running. Please show us how that works.
Tasty does not have stop losses on FOPs. Only IBKR has but they aren’t very reliable anyways
Tastytrade does not support stop losses on complex orders like this. However, I have a futures options autotrader that I'm building that will allow you to do it and not get faked out by market makers
The 112 cultists are pissed, you just shat on their dreams of making fortunes by selling tail-hedges.
Haha I feel like every 112 trading video forgets to mention this very important aspect of 112s
@@AustinBouley Yeah, everyone should keep it small and build their hedges before going apeshit LOL :D
There are no bracket option for these trades - how do you put stop loss in tasty
TastyTrade (and most other brokers) do not support stop losses on options or any complex options like 112s which is why I built the Options Auto Trader that was built to automate entries, exits, hedges, and more flawlessly :)
You are selling the 2 puts to close to the market. Go further out, take less premium and let it run it's course. You can do the ones you are doing in a bull market. But if the trade goes against you. You have a problem.
Even if you use further OTM puts, you still have this same issue because you have way more short puts than long puts.
very good content. Thank you. So - -how were you protecting the two 1-1-2 trades that you have on . Are you setting 4x max profit stop limit or market stop GTC orders with each trade? sounds like one quick sell off could wipe u out?
I have hedges from other 112 trades and a stop loss on the current 112 trades.
Why do you have a stop loss when you have hedges on?? If the hedge is constructed properly, it will negate the need for any stop loss …. Your actions are redundant @@AustinBouley
Very good point. I have noticed this myself.
Yes, pros and cons to all trades
I never liked this strategy…. Bear trap does nothing for you, until the end of the cycle, it’s like having a naked put, basically…Large, long lasting risk exposure and high margin requirement is not worth the mostly meager returns…… Careful management and hedging is necessary, as you correctly explain, if you really won’t to use it…. There are many strategies similar and better, in my opinion - like 1/3 ratio, for example - bigger potential, easier to manage….. Even the simple credit spread has better yield and risk/reward…..
so true, please provide an example of your 1/3 ratio trade.
I think 112 can be a good trade, but naked puts with stop losses can be just as good if not better as long as you have stand alone hedges on
@@AustinBouleyhave you ever encounter liquidity drain when market makers just pull out their books when volatility spikes?
I did, and no stop loss will save you from that or from a circuit breaker to circuit breaker black swan.
Stop losses are great for investors on equity.
Stop losses on derivatives like options have obscene slippage in rapid vol expansion.
@@rsbmg the good thing is that these people bring much needed tail hedge liquidity for people who know what tail hedges are for 😉
@@redeyes5568 sell the 20 delta put and buy 3 puts lower on the chain from the credit received
Bro..not geeting the 1:1:2 pdf...plzz help
Shoot me an email hello@optionsautotrader.com
I guess that's why Tom likes going all the way out to 120 dte
That can help, but the trade takes a lot longer to finish!
When you do much lower DTE and treat it as 1 trade without a campaign of course you get those issues.
What do you mean by that?
@@AustinBouley He means that you should be putting this on every 120 DTE or put one or once a week or so based on your net liq. Example: Let us say I have 15k account I would put on 4 of these 112 a month and it would mature about 3-4 months.
@@Shinigamiyukyep it staggers out the deltas on down moves. Past put debit spreads offset new nakeds. Treating this as 1 separate trade all but defeats the purpose.
@@Thetatraderzso you’re selling tail hedges that are extremely convex and hedge them with debit spreads that only carry the spread as max gain. Good luck not blowing up
You shouldn’t have a channel, and certainly shouldn’t be dispensing information if you have to ask a question like that@@AustinBouley
everybody forgot about a volmargedon....
Don't say it's name...
To late lol
It's not a huge issue, just something to be aware of :)
You got the click and with the clickbait, but now your credibility is shot. Comparing Jan 24 to April 19 expiry with no mention of Theta. My next click is "do not recommended this channel". 👎
Sorry you felt that way! I guess you're a 112 lover
I don’t even know what you’re yammering about. Terrible video man. Not sure why Yt recommended this video to me. I trade 0DTE spreads on SPX. It looks like you’re trading futures, or options on futures? And didn’t explain what your strategies even are? Soooo..
It’s not you, it’s me. But we’re thru lol
He mentioned nothing about time value and compared Jan theoretical to an April expiry. Clicks = $$
😂
No problem! Have a good one and thanks for watching and commenting :)